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Global Macroeconomic Consequences of Pandemic Influenza

Warwick McKibbin () and Alexandra Sidorenko

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper explores the implications of a pandemic influenza outbreak on the global economy through a range of scenarios (mild, moderate, severe and ultra) that span the historical experience of influenza pandemics of the twentieth century. An influenza pandemic would be expected to lead to: a fall in the labour force to different degrees in different countries due to a rise in mortality and illness; an increase in the cost of doing business; a shift in consumer preferences away from exposed sectors; and a re-evaluation of country risk as investors observe the responses of governments. The paper finds that even a mild pandemic has significant consequences for global economic output. The mild scenario is estimated to cost the world 1.4 million lives and close to 0.8% of GDP (approximately $U330 billion) in lost economic output. As the scale of the pandemic increases, so do the economic costs. A massive global economic slowdown occurs in the “ultra” scenario with over 142.2 million people killed and a GDP loss of $US4.4 trillion. The composition of the slowdown differs sharply across countries with a major shift of global capital from the affected economies to the less affected safe haven economies of North America and Europe.

Date: 2006-12
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