The Economy in the Aftermath of the Earthquake

Ahmed, Shaghil and Hyder, Kalim and Areeb, Tabinda (2005): The Economy in the Aftermath of the Earthquake. Published in: Research Report No. RR63

Abstract

In this study, we use simulations from the Social Policy and Development Centre’s large-scale empirical model of Pakistan’s economy to quantify the economic losses resulting from the devastating earthquake that hit the country on October 8, 2005. We then use the model to trace the path that the economy can be expected to follow under the relief and reconstruction assumptions that seem most plausible at present. The main results are as follows: First, the earthquake could initially shave off 1½ percentage points from economic growth. In the absence of reconstruction, this initial hit would lead to permanent losses of levels of the capital stock, consumption, and income that are substantial. Second, the assumed rebuilding effort of $5.8 billion over a five-year period will bring the economy back only half-way to the path that would have prevailed in the absence of the earthquake. Third, this rebuilding effort will be inflationary in the short run, and could add 2 percentage points to the rate of increase of consumer prices in 2005-06 and 1 percentage point the following year.

• Item Type: MPRA Paper
• Language: English
• Keywords: Macroeconometric Modeling, Earth Quake, losses
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics

References

Asian Development Bank (ADB) and the World Bank (WB), 2005, “Pakistan 2005 Earthquake: Preliminary Damage and Needs Assessment,” manuscript, Islamabad, November. United Nations (UN), 2005, “Pakistan 2005 Earthquake: Early Recovery Framework with Preliminary Costs of Proposed Interventions,” manuscript, Islamabad, November.