2016 Volume 72 Issue 5 Pages I_111-I_121
As economic losses caused by natural disasters increase, assessing the economic impact of a future possible natural disaster is becoming more and more important. A computable general equilibrium (CGE) model is a strong candidate for such an assessment. The CGE approach is, however, criticized in that key parameters are often not econometrically estimated.
The first purpose of this study is to calibrate a set of substitution parameters in a CGE model for the economic impact assessment of a natural disaster. The study develops a recursive-dynamic multiregional CGE model for Japan and then calibrates a set of substitution parameters for this model. A heuristic method is employed for the calibration, in which the substitution parameters in the CGE model are adjusted so as to reproduce the actual economic impacts of the 2011 Great East Japan earthquake.
The second purpose of this study is to conduct a quantitative assessment of the economic impacts of inoperative oil refinery plants stemming from the Nankai trough great earthquake using the CGE model with the calibrated substitution parameters. The impacts on GDP, GRP, and production of the other industries are assessed.