Identifying structural breaks in stochastic mortality models

Colin O'Hare and Youwei Li

MPRA Paper from University Library of Munich, Germany

Abstract: In recent years the issue of life expectancy has become of upmost importance to pension providers, insurance companies and the government bodies in the developed world. Significant and consistent improvements in mortality rates and hence life expectancy have led to unprecedented increases in the cost of providing for older ages. This has resulted in an explosion of stochastic mortality models forecasting trends in mortality data in order to anticipate future life expectancy and hence quantify the costs of providing for future ageing populations. Many stochastic models of mortality rates identify linear trends in mortality rates by time, age and cohort and forecast these trends into the future using standard statistical methods. These approaches rely on the assumption that structural breaks in the trend do not exist or do not have a significant impact on the mortality forecasts. Recent literature has started to question this assumption. In this paper we carry out a comprehensive investigation of the presence or otherwise of structural breaks in a selection of leading mortality models. We find that structural breaks are present in the majority of cases. In particular, where there is a structural break present we find that allowing for that improves the forecast result significantly.

Keywords: Mortality; stochastic models; forecasting; structural breaks (search for similar items in EconPapers)
JEL-codes: C51 C52 C53 G22 G23 J11 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-age, nep-for, nep-hea, nep-ias and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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