Economic impacts of disasters taking into account the costs of substitution of intermediate goods

This paper focuses on the cost of substitution of intermediate goods and investigates how it affects macroeconomic dynamics after a natural disaster. This paper develops a macroeconomic model to show that the cost of substitution of intermediate goods is an important factor for expanding economic loss by inducing the ¿cascade effect.¿ In addition, it illustrated that the cost of substitution can affect not only the amount of economic loss but also economic recovery speed.