The Design of a Dynamic Stochastic General Equilibrium Model to aim of Investigate the Effect of Pandemic Disease Outbreak on the Dynamics of Macroeconomic Variables

Ali Keshavarzi (), Hamid Reza Horry (), Sayyed Abdolmajid Jalaee Esfandabadi (), Meysam Rafei () and Mehdi Nejati ()
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Ali Keshavarzi: PhD Student in Economics, Shahid Bahonar university of Kerman
Hamid Reza Horry: Associate Professor of Economics, Shahid Bahonar university of Kerman
Sayyed Abdolmajid Jalaee Esfandabadi: Professor of Economics, Shahid Bahonar university of Kerman
Meysam Rafei: Assistant Professor of Economics, Kharazmi University
Mehdi Nejati: Associate Professor of Economics, Shahid Bahonar university of Kerman

Quarterly Journal of Applied Theories of Economics, 2023, vol. 10, issue 1, 1-32

Abstract: The coronavirus outbreak in December 2019 quickly became a public health crisis, first affecting the Chinese economy and then the global economy. This issue led to the use of various models to modelling the prevalence of the virus. The present study is aimed to understand the effect of a pandemic outbreak on Iranian’s economy within the framework of a Dynamic Stochastic General Equilibrium model. To do this, after calibrating the parameters based on the quarterly information of Iran's economy during the period 1991-2016, in different scenarios and according to the persistence of health disaster risk, model simulation was performed. The results showed that the outbreak of a pandemic reduced working hours and consequently the marginal productivity of physical capital; Thus physical investment, production, and total consumption are reduced. Based on the research findings, it is recommended that the government, as a policy-maker, play a stabilizing role under pandemic disease conditions

Keywords: Pandemic Disease; Health disaster risk; Dynamics of macroeconomic variables; Dynamic Stochastic General Equilibrium; Real Business Cycle (search for similar items in EconPapers)
JEL-codes: E32 I10 I18 (search for similar items in EconPapers)
Date: 2023
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