Macroeconomic Forecasting of Actuarial Valuation Parameters Using Econometric Modelling

Course 5B of the Association's actuarial programme — the econometric methods an actuary uses to justify macroeconomic assumptions: inflation, salary growth, interest rates and returns. The course progresses from linear regression and forecasting to distributed lag models, non-linear models and maximum likelihood, systems of equations, time series analysis, backtesting of models and building a consistent set of actuarial macroeconomic parameters. It concludes with a comprehensive econometric project.

Course programme

1. Linear regression: specification and estimation — ordinary least squares, standard errors, coefficient of determination.
2. Forecasting with single-equation models — point and interval forecasts, conditional forecasts, accuracy measures.
3. Distributed lag models — Koyck model, adaptive expectations, short-run and long-run multipliers.
4. Non-linear models and maximum likelihood — logarithmic models, logistic lapse model.
5. Simultaneous equation systems — endogeneity, identification, two-stage least squares.
6. Smoothing and extrapolation of time series — trend, moving averages, exponential smoothing, seasonality.
7. Stationarity and stochastic time series — autoregression, unit root, spurious regression.
8. Model validation and backtesting — out-of-sample forecasting, Chow test, residual analysis, model governance.
9. Actuarial macroeconomic parameters — Fisher equation, consistency of assumptions, yield curve and ultimate forward rate.
10. Comprehensive econometric project — from data to a forecast and its application in pension valuation.

Each lesson comes with study notes containing a table of notation, a worked example and self-study problems, plus a lesson test. The course final test has 40 tasks, including two mini-projects, and leads to an ASAB certificate.

Duration: 10 video lessons, 2 h 33 min of video + lesson tests and a final test.