Simulating the global economic ripples after a major hurricane — the case of Hurricane Sandy

Tropical cyclones range among the most severe disasters on Earth. Their economic repercussions along the supply and trade network also affect remote economies that are not directly affected. To find these repercussions in data is challenging due to the strong volatility of economic interactions. Numerical simulations can help to identify these ripples by approaching the problem from an exploratory angle isolating the effect of interest. We here simulate possible global repercussions for the example case of Hurricane Sandy (2012) using the shock-propagation model Acclimate. It models the behaviour of over 7,000 regional economic sectors, interlinked through about 1.8 million trade relations. The modeled shock yields a global three-phase ripple: an initial demand reduction and price decrease, followed by a supply shortage with increasing prices, and finally a recovery phase. Regions with strong trade relations to the US experience stronger magnitudes of the ripple. A dominating demand reduction or supply shortage leads to overall consumption gains or losses of a region, respectively. Throughout the three phases the model suggests overall a global consumption loss (~ 0.03%) with the strongest impact onto the US itself (~ 0.14%).