Impact of Longevity Risks on the Korean Government: Proposing a New Mortality Forecasting Model

Yongok Choi

Korean Economic Review, 2020, vol. 36, 201-225

Abstract: Korea’s life expectancy has experienced an unprecedented rapid increase that is significantly higher than that in other advanced economies. However, this phenomenon also signifies that the Korean government faces a considerable financial risk. This study identifies the factors that contribute to the overestimation of mortality and develops a new mortality forecasting model. In addition, the population projections of the new mortality forecasts are used to quantitatively measure the economic size of the longevity risks faced by the Korean government. Results suggest that if substantial longevity exposure is realized in the context of the Korean government, the longevity can solely increase the debt-to-GDP ratio by 33.8%p by 2060. Drawing on these findings, this study concludes with suggestions to mitigate such longevity risks.

Keywords: Population Projection; Longevity Risk; Government Debt; Nonparametric Panel Regression (search for similar items in EconPapers)
JEL-codes: C14 H55 H68 J11 (search for similar items in EconPapers)
Date: 2020
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