Population Forecasting with Endogenous Migration: An Application to Trans-Tasman Migration

Abstract

Official population projections are often based on cohort component methods in which migration levels or rates enter exogenously. When net migration accounts for a large proportion of population change and fluctuates strongly, more reliable population forecasts can be derived by explicitly forecasting migration first. This article focuses on forecasting migration between Australia and New Zealand (trans-Tasman migration), which is largely visa-free and therefore resembles internal migration. Net trans-Tasman migration is a major component of New Zealand population change and is embedded in this article in a Bayesian or unrestricted vector autoregression (VAR) model, which includes foreign and domestic economic variables. When time series of net migration are available, this approach provides a useful input into forecasting population growth in the short run in the absence of major policy changes. This conclusion applies equally to interregional migration and to unrestricted international migration between economically integrated nations.