This post is a guest contribution by Jay Bryson*, global economist of Wachovia.

The swine flu epidemic has become front page news this week. Mexico is the epicenter of the outbreak and thousands of cases have been reported in that country. However, scores of cases have been confirmed in the United States, and countries as far afield as Israel and New Zealand have hospitalized people with symptoms that resemble swine flu. Not only have the Mexican stock market and currency been hammered over the past few days, but financial markets in most other countries have been adversely affected as well.

The financial and economic costs of the epidemic will ultimately depend on its severity. The outbreak of Severe Acute Respiratory Syndrome (SARS) that swept through Asia in the spring of 2003 is instructive. The SARS epidemic was deadly – nearly 800 people in 7 countries died – but it was not catastrophic. The economic effects of that epidemic were significant but temporary. However, if the current outbreak were to morph into something like the influenza pandemic of 1918, which killed 50 million people worldwide, the economic and financial fallout would obviously be much more devastating.

In this brief note, we attempt to outline how the economies of Mexico and other countries could be affected by the current outbreak of swine flu. In that regard, we draw on the experience of the 2003 SARS epidemic to inform our economic prognosis and we reference some analytical work that has modeled the economic effects of severe pandemics. We acknowledge, however, that it is ultimately impossible to forecast precisely the economic and financial effects of the current outbreak due to the unpredictable nature of the epidemic.

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Source: Jay Bryson, Wachovia, April 28, 2009.

* Jay Bryson joined Wachovia in 1998 to provide analysis on financial markets and macroeconomic developments in foreign economies. Before joining Wachovia, Dr. Bryson was an economist in the Division of International Finance at the Federal Reserve Board in Washington, D.C. From 1989 to 1992, Dr. Bryson was an assistant professor of economics at the University of Alabama. He also has lectured on international economics and macroeconomics at the School for Advanced International Studies at Johns Hopkins University and at Georgetown University.

He has published in academic and popular economic journals and his comments on the economy regularly appear in The Wall Street Journal, the New York Times, and USA Today. He also makes frequent appearances on CNBC and Bloomberg TV.

Dr. Bryson received his B.A. and Ph.D. degrees in economics from the University of North Carolina at Chapel Hill.

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