GAMMA-NORMAL VERSION OF THE LEE-CARTER MODEL FOR FORECASTING MORTALITY

Abstract

The Lee-Carter model was primarily designed for the mortality pattern of the United States and has been used by many developed Countries as a gold standard to model their mortality pattern. Despite its merits, it is observed from  literature that the Lee and Carter (1992) and some of its variants have problems capturing a good fit when mortality rate has an increasing trend for some ages while decreasing for others or a fluctuating increase and decrease especially with respect to mortality data from developing Countries. In this study, based on the contributions of Zografos and Balakrishnan (2009) and Lima et al. (2015), we propose a Gamma-normal version of the Lee-Carter model which addresses the distribution of the error term inherent in the Lee-Carter approach. It is hoped that this new model will give a better fit and account for peculiarities at different ages without any loss of generality.

Keywords:  Lee-Carter model, mortality, Gamma-normal, Age, developing Countries.