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The Economy in the Aftermath of the Earthquake

Author

Listed:
  • Ahmed, Shaghil
  • Hyder, Kalim
  • Areeb, Tabinda

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.

Suggested Citation

  • Ahmed, Shaghil & Hyder, Kalim & Areeb, Tabinda, 2005. "The Economy in the Aftermath of the Earthquake," MPRA Paper 30530, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:30530
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    More about this item

    Keywords

    Macroeconometric Modeling; Earth Quake; losses;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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