An Ex post Evaluation of Economic Impacts of SARS on Taiwan Using a Dynamic Computable General Equilibrium Model

The outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 has resulted in significant losses to the tourism and tourism-related industries in China, Hong Kong, Singapore, and Taiwan. Through the inter-industry feedback effects, the economic impacts of SARS not only affect the tourism-related services industries, but also other industries and the whole economy. There have been a number of ex ante studies that have quantified the potential impacts of SARS on Taiwan¡¦s economy (e.g., Chou et al. 2003, Wu et al. 2003). This article provides an ex post economy-wide assessment of the SARS impacts on Taiwan. The model used is Taiwan General Equilibrium Model (TAIGEM), a dynamic, computable general equilibrium (CGE) model of the Taiwan¡¦s economy, which is derived from the Australian ORANI model and the MONASH model (Dixon, Parmenter, Sutton and Vincent, 1982; Dixon and Rimmer, 2002). The input-output database was compiled from the 160-sector Use Table of the 1999 Taiwan¡¦s Input-Output Tables. To provide an ex post evaluation, we use historical closure and ex post closure (a closure similar to decomposition closure) originally from MONASH innovations. Comparisons with other ex ante SARS impact assessments are also provided. Results indicate that only a few industries like medicines, medical health services and precision instruments would benefit from SARS, while almost all other industries in Taiwan suffered with output losses as well as employment and welfare reductions. Loss to gross domestic product (GDP) of Taiwan is estimated to be between 0.84 and 1.61 percent which is much bigger than those predicted by the previous ex ante studies.