Assessing the economic impacts of a perfect storm of extreme weather, pandemic control, and export restrictions: A methodological construct

Abstract

AbstractThis article investigates the economic impacts of a multi‐disaster mix comprising extreme weather, such as flooding, pandemic control, and export restrictions, dubbed a “perfect storm.” We develop a compound‐hazard impact model that improves on the ARIO model by considering the economic interplay between different types of hazardous events. The model considers simultaneously cross‐regional substitution and production specialization, which can influence the resilience of the economy to multiple shocks. We build scenarios to investigate economic impacts when a flood and a pandemic lockdown collide and how these are affected by the timing, duration, and intensity/strictness of each shock. In addition, we examine how export restrictions during a pandemic impact the economic losses and recovery, especially when there is the specialization of production of key sectors. The results suggest that an immediate, stricter but shorter pandemic control policy would help to reduce the economic costs inflicted by a perfect storm, and regional or global cooperation is needed to address the spillover effects of such compound events, especially in the context of the risks from deglobalization.