The Natural Disasters Effect on Non-oil GDP in IRAN

Natural disasters as unanticipated events are negative shocks to aggregate supply. The response of an economy to these shocks depends on various factors including implementation the engineering codes in building, existence of sufficient stocks of farm products and cash assets, public training and management method of natural crises. In this paper, it is tried to study the importance and impact of occurred natural disasters on aggregate level of economic activities. To do this, the Auto-Regressive Distributed Lags (ARDL) has been used over the 1959-2004 period. The estimation results of short- and long-run models indicate the negative impact of natural disasters on Iranian economy and a U-shaped relationship between natural disaster damages and non-oil GDP. Also the estimation of Error Correction Model (ECM) implies that only 17 percent of disequilibria are adjusted in each period.
JEL Classification: E22, Q54, R53