SFB649DP2015 007
Stochastic Population Analysis: A Functional Data Approach
Lei Fang
Wolfgang K. Härdle
Abstract:
Based on the Lee-Carter (LC) model, the benchmark in population forecasting, a variety of extensions
and modifications are proposed in this paper. We investigate one of the extensions, the Hyndman-Ullah
(HU) method and apply it to Asian demographic data sets: China, Japan and Taiwan. It combines ideas
of functional principal component analysis (fPCA), nonparametric smoothing and time series analysis.
Based on this stochastic approach, the demographic characteristics and trends in different Asian regions
are calculated and compared. We illustrate that China and Japan exhibited a similar demographic trend in
the past decade. We also compared the HU method with the LC model. The HU method can explain more
variation of the demographic dynamics when we have data of high quality, however, it also encounters
problems and performs similarly as the LC model when we deal with limited and scarce data sets, such as
Chinese data sets due to the substandard quality of the data and the population policy.
Keywords:
Functional principal component analysis; Nonparametric smoothing; Mortality forecasting;
Fertility forecasting; Asian demography; Lee-Carter model, Hyndman-Ullah method
JEL Classification:
C14, C32, C38, J11, J13