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Estimation of Uncertainty in Mortality Projections Using State-Space Lee-Carter Model

Author

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  • Rokas Gylys

    (Institute of Mathematics, Vilnius University, Naugarduko 24, LT-03225 Vilnius, Lithuania
    Both authors contributed equally to this work.)

  • Jonas Šiaulys

    (Institute of Mathematics, Vilnius University, Naugarduko 24, LT-03225 Vilnius, Lithuania
    Both authors contributed equally to this work.)

Abstract

The study develops alternatives of the classical Lee-Carter stochastic mortality model in assessment of uncertainty of mortality rates forecasts. We use the Lee-Carter model expressed as linear Gaussian state-space model or state-space model with Markovian regime-switching to derive coherent estimates of parameters and to introduce additional flexibility required to capture change in trend and non-Gaussian volatility of mortality improvements. For model-fitting, we use a Bayesian Gibbs sampler. We illustrate the application of the models by deriving the confidence intervals of mortality projections using Lithuanian and Swedish data. The results show that state-space model with Markovian regime-switching adequately captures the effect of pandemic, which is present in the Swedish data. However, it is less suitable to model less sharp but more prolonged fluctuations of mortality trends in Lithuania.

Suggested Citation

  • Rokas Gylys & Jonas Šiaulys, 2020. "Estimation of Uncertainty in Mortality Projections Using State-Space Lee-Carter Model," Mathematics, MDPI, vol. 8(7), pages 1-23, June.
    • Handle: RePEc:gam:jmathe:v:8:y:2020:i:7:p:1053-:d:378305
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    References listed on IDEAS

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