Bayesian estimation of a dynamic stochastic general equilibrium model with health disaster risk

Pandemics are not new, but they continue to prevail in the last three decades. A variety of reasons such as globalization, trade growth, urbanization, human behavior change, and the rise of the prevalence of viral diseases among animals can account for this issue. Outbreaks of COVID-19 indicated that viral diseases have spread easily among nations, influencing their economic stability. In this vein, the motivation behind the present study was to get an understanding of the effect of the rise of the health disaster risk on the dynamics of Iran's macroeconomic variables by using Bayesian Dynamic Stochastic General Equilibrium. As opposed to Computable General Equilibrium models, DSGE models can be evaluated in a stochastic environment. Since the duration of the virus outbreak and its effect on the economy is not known, it is more appropriate to use these models. The results demonstrated that increased health disaster risk has a remarkable negative effect on macroeconomic variables. According to the findings of the research and the significance of public vaccination as an essential solution for improving health status and quality of life, it was suggested that the government pave the path for the thriving of businesses and socio-economic activities as early as possible by employing specific policies such as tax exemption or budget allocation for vaccine manufacturing companies or importers.