Accounting for COVID-19-type shocks in mortality modeling: a comparative study

Simon Schnürch, Torsten Kleinow and Andreas Wagner
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Simon Schnürch: Department of Financial Mathematics, Fraunhofer Institute for Industrial Mathematics ITWM and Department of Mathematics, University of Kaiserslautern
Torsten Kleinow: Department of Actuarial Mathematics and Statistics and the Maxwell Institute for Mathematical Sciences, School of Mathematical and Computer Sciences, Heriot-Watt University
Andreas Wagner: Department of Financial Mathematics, Fraunhofer Institute for Industrial Mathematics ITWM

JODE - Journal of Demographic Economics, 2023, vol. 89, issue 3, 483-512

Abstract: Mortality shocks such as the one induced by the COVID-19 pandemic have substantial impact on mortality models. We describe how to deal with them in the period effect of the Lee–Carter model. The main idea is to not rely on the usual normal distribution assumption as it is not always justified. We consider a mixture distribution model based on the peaks-over-threshold method, a jump model, and a regime switching model and introduce a modified calibration procedure to account for the fact that varying amounts of data are necessary for calibrating different parts of these models. We perform an extensive empirical study for nine European countries, comparing the models with respect to their parameters, quality of fit, and forecasting performance. Moreover, we define five exemplary scenarios regarding the future development of pandemic-related mortality. As a result of our evaluations, we recommend the peaks-over-threshold approach for applications with a possibility of extreme mortality events.

Keywords: COVID-19; Lee-Carter model; Mortality forecasting; Mortality Modelling; Mortality shocks (search for similar items in EconPapers)
JEL-codes: C53 G22 J11 (search for similar items in EconPapers)
Date: 2023-09-01
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvde:v:89:y:2023:i:3:p:483-512

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