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We simulate the effects of a hypothetical H1N1 epidemic in the U.S. using a quarterly CGE model.  Quarterly periodicity allows us to capture the short-run nature of an epidemic.  We find potentially severe economic effects in the peak quarter. Averaged over the epidemic year, the effects are considerably damped. Our results indicate that the macroeconomic consequences of an epidemic are more sensitive to demand-side effects, such as reductions in international tourism and leisure activities, than to supply-side effects, such as reductions in productivity.  This suggests that demand stimulus policies might be an appropriate economic response to a serious epidemic.

Effects on the U.S. of an H1N1 Epidemic: Analysis with a Quarterly CGE Model