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Assessing components of uncertainty in demographic forecasts with an application to fiscal sustainability

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  • Juha Alho
  • Jukka Lassila

Abstract

When the future evolution of demographic processes is described in a stochastic setting, the challenge is to communicate the meaning of forecast uncertainty in an understandable way, to decision makers and public at large. For the purpose of risk communication, a formal setting is developed in which the roles of the demographic processes on point forecasts, and more generally, on predictive distributions, can be elucidated. The communication problem becomes central in fiscal decision making, when eventual forecast errors have differential implications on the value of the policy options being considered. Tax rate that is required to maintain financial sustainability, until a given target year, is used for illustration.

Suggested Citation

  • Juha Alho & Jukka Lassila, 2023. "Assessing components of uncertainty in demographic forecasts with an application to fiscal sustainability," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(7), pages 1560-1568, November.
    • Handle: RePEc:wly:jforec:v:42:y:2023:i:7:p:1560-1568
    DOI: 10.1002/for.2976
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    References listed on IDEAS

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    1. Don Patinkin, 1993. "Israel's Stabilization Program of 1985, or Some Simple Truths of Monetary Theory," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 103-128, Spring.
    2. Ronald Lee & Andrew Mason (ed.), 2011. "Population Aging and the Generational Economy," Books, Edward Elgar Publishing, number 13816, March.
    3. Jukka Lassila & Tarmo Valkonen, 2018. "Longevity, Working Lives, And Public Finances," Contemporary Economic Policy, Western Economic Association International, vol. 36(3), pages 467-482, July.
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    Cited by:

    1. Tóth, Csaba G., 2025. "A New Approach to Understanding Population Change in Central and Eastern Europe," SocArXiv 3qn82_v1, Center for Open Science.

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