ABSTRACT
PurposeThe main motivation of the present study is to understand the severity of the effect of health shock on Iran's oil economy and analyze the role of government under these conditions.Design/methodology/approachDynamic stochastic general equilibrium (DSGE) models can show the precise interactions between market decision-makers in the context of general equilibrium. Since the duration of the virus outbreak and its effect on the economy is not known, it is more appropriate to use these models.FindingsThe results of the survey of hands-on policies scenarios compared to the state of hands-off policy indicate that the effect of government expending shocks on the economy under pandemic disease conditions has much less feedback on macroeconomic variables.Originality/valueAs a proposed policy, it is recommended that the government play a stabilizing role under pandemic disease conditions.Key messages There is no study regarding health shock and its economic effects in Iran using DSGE models. Also, in foreign studies, the health shock in an oil economy has not been modeled.The general idea in the present study is how the prevalence of a pandemic infectious disease affects the dynamics of macroeconomic variables.In three different scenarios, according to the persistence of health disaster risk and the deterioration rate of health capital due to this shock, the model is simulated.In modeling pandemic diseases, quarantine hours are considered as part of the total time of individuals.According to the research findings, it is recommended that the government, as a policy-maker, play a stabilizing role under pandemic crises conditions.
ABSTRACT
Pandemics are not new, but they continue to prevail in the last three decades. A variety of reasons such as globalization, trade growth, urbanization, human behavior change, and the rise of the prevalence of viral diseases among animals can account for this issue. Outbreaks of COVID-19 indicated that viral diseases have spread easily among nations, influencing their economic stability. In this vein, the motivation behind the present study was to get an understanding of the effect of the rise of the health disaster risk on the dynamics of Iran's macroeconomic variables by using Bayesian Dynamic Stochastic General Equilibrium. As opposed to Computable General Equilibrium models, DSGE models can be evaluated in a stochastic environment. Since the duration of the virus outbreak and its effect on the economy is not known, it is more appropriate to use these models. The results demonstrated that increased health disaster risk has a remarkable negative effect on macroeconomic variables. According to the findings of the research and the significance of public vaccination as an essential solution for improving health status and quality of life, it was suggested that the government pave the path for the thriving of businesses and socio-economic activities as early as possible by employing specific policies such as tax exemption or budget allocation for vaccine manufacturing companies or importers.
ABSTRACT
Pandemics are not new, but they continue to prevail in the last three decades. A variety of reasons such as globalization, trade growth, urbanization, human behavior change, and the rise of the prevalence of viral diseases among animals can account for this issue. Outbreaks of COVID-19 indicated that viral diseases have spread easily among nations, influencing their economic stability. In this vein, the motivation behind the present study was to get an understanding of the effect of the rise of the health disaster risk on the dynamics of Iran's macroeconomic variables by using Bayesian Dynamic Stochastic General Equilibrium. As opposed to Computable General Equilibrium models, DSGE models can be evaluated in a stochastic environment. Since the duration of the virus outbreak and its effect on the economy is not known, it is more appropriate to use these models. The results demonstrated that increased health disaster risk has a remarkable negative effect on macroeconomic variables. According to the findings of the research and the significance of public vaccination as an essential solution for improving health status and quality of life, it was suggested that the government pave the path for the thriving of businesses and socio-economic activities as early as possible by employing specific policies such as tax exemption or budget allocation for vaccine manufacturing companies or importers.