Assessing Components of Uncertainty in Demographic Forecasts with an Application to Fiscal Sustainability

Juha Alho and Jukka Lassila

No 92, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: 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 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.

Keywords: Aging; Demography; Predictive distribution; Risk communication; Stationary equivalent population (search for similar items in EconPapers)
JEL-codes: H68 J11 J18 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2022-02-25
New Economics Papers: this item is included in nep-age
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Persistent link: https://EconPapers.repec.org/RePEc:rif:wpaper:92

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