Forecasting Indonesian mortality rates using the Lee-Carter model and ARIMA method

Abstract

If information about the mortality rate for some future periods can be obtained in the present time then the financial planning and policy to be taken are expected to be better and directed. The model used to calculate the mortality rate in this paper is the Lee-Carter model. There are three parameters of the model, that is ax, bx and kt. Parameter ax will be estimate using average log mortality while bx and kt will be estimate using Singular Value Decomposition (SVD) method. Then the future mortality rates will be forecast with the use of the ARIMA (Auto Regressive Integrated Moving Average) method. Meanwhile, the whole process in this study will be implemented using software R. The final results of the forecasting will be presented in tabular and graphical form. The process show good results of forecasting mortality rate for several years or period based on the pattern and error less than 0.3 %.

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