Grouped functional time series forecasting: An application to age-specific mortality rates

Han Lin Shang and Rob Hyndman

No 4/16, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: Age-specific mortality rates are often disaggregated by different attributes, such as sex, state and ethnicity. Forecasting age-specific mortality rates at the national and sub-national levels plays an important role in developing social policy. However, independent forecasts of age-specific mortality rates at the sub-national levels may not add up to the forecasts at the national level. To address this issue, we consider the problem of reconciling age-specific mortality rate forecasts from the viewpoint of grouped univariate time series forecasting methods (Hyndman, Ahmed, et al., 2011), and extend these methods to functional time series forecasting, where age is considered as a continuum. The grouped functional time series methods are used to produce point forecasts of mortality rates that are aggregated appropriately across different disaggregation factors. For evaluating forecast uncertainty, we propose a bootstrap method for reconciling interval forecasts. Using the regional age-specific mortality rates in Japan, obtained from the Japanese Mortality Database, we investigate the one- to ten-step-ahead point and interval forecast accuracies between the independent and grouped functional time series forecasting methods. The proposed methods are shown to be useful for reconciling forecasts of age-specific mortality rates at the national and sub-national levels, and they also enjoy improved forecast accuracy averaged over different disaggregation factors.

Keywords: Forecast reconciliation; hierarchical time series forecasting; bottom-up; optimal combination; Japanese Mortality Database (search for similar items in EconPapers)
JEL-codes: C14 C32 J11 (search for similar items in EconPapers)
Pages: 30
Date: 2016
New Economics Papers: this item is included in nep-age, nep-ets, nep-for and nep-lab
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Citations: View citations in EconPapers (4)

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