A Conceptual Framework for Economic Resiliency in the Context of Resistive Economics

• Reza HosnaviReza Hosnavi, Associate professor, Malek Ashtar University of Technology

• Mohammad Ali NekooieMohammad Ali Nekooie, Assist. professor, Malek Ashtar University of technology

• Foad FatolahiFoad Fatolahi*, Visiting lecturer, Shahid Beheshti University

Pathogens

People

Perceptions

Politics

Places

Pathways

Notional

differentiation

between hazards

(H)

and vulnerability

(V)

V VulnerabilityVulnerability

HazardHazardH

IntroductionIntroduction

Some states have high economic growth and high GDP per capita in spite of their high exposure to external economic shocks. there are factors which may offset the disadvantages associated with such vulnerability.

Projected gross domestic product (GDP) losses resulting from hurricane damage

Consequence analysesConsequence analyses

How to allocate emergency resources How to allocate emergency resources Anticipation of future similar disruptive eventsAnticipation of future similar disruptive events

“The ability of a system, community or society exposed to hazards to

• resist [or avoid],

• absorb,

• accommodate and

• recover from the effects of a hazard in a timely and efficient

manner”

• operational and investment costs

• environmental impact and supply longevity

• physical failure and social failure

COSTCOSTSusta

inab

ility

Sustain

abili

ty

Resili

ency

Resili

ency

Resilience has become such a priority for the United StatesResilience has become such a priority for the United States20092009

“Our goal is to ensure a more resilient Nation -- one in which individuals, communities, and our economy can adapt to changing conditions as well as withstand and rapidly recover from disruption due to emergencies.”

Resiliency is “the capability of an asset, system, or network Resiliency is “the capability of an asset, system, or network to maintain its function during or to recover from a to maintain its function during or to recover from a terrorist attack or other incident.” (U.S. Department of terrorist attack or other incident.” (U.S. Department of Homeland Security 2006)Homeland Security 2006)

Economies vulnerability and resiliency has been deeply taken into account from 2007 financial crisis and was considered in Iran under the title resistive economy by Islamic Revolution Leader which was emphasized as the future progress path.

The consequences of vulnerability on a resistive (and resilient) economy is minor.

Vulnerability at macroeconomic (economic growth and development) and microeconomic (systems and firms) levels affect economy

Briguglio (2003): economic vulnerability is ascribed to inherent conditions affecting a country’s exposure to exogenous shocks, while economic resilience is associated with actions undertaken by policymakers which enable a country to withstand or recover from the negative effects of shocks

Vulnerability at macroeconomic (economic growth and development) and microeconomic

(systems and firms) levels affect economy

individual-asset-based risk analysis and policy is difficult and expensive to manage. A systems approach is needed

No conceptual framework for economic resiliency in Iran, this article intends to develop a theoretical framework including drives, variables, measurement of economic resiliency

MethodologyMethodologyMethodologyMethodology

determine variables for economic resiliency and evaluate the relative contribution of each variable to economic resilience

empirical research, e.g. using surveys, or, from a theoretical model, drawback: no literature in Iran

questionnaire, respondents asked to determine which variables are important and weigh important variables

1 to 7 Likert Scale was used1 to 7 Likert Scale was used

• Correlation between the variables of macroeconomic resilience:

• The Conceptual framework shows that macroeconomic resilience is not at a desirable level in Iran, hence weak resistive economy.

Macroeconomic Market Efficiency

Good Governance

Social Development

Macroeconomic 1

Market Efficiency 0.18 1

Good Governance 0.29 0.11 1

Social Development 0.25 0.14 0.61 1

Linear E

quation

Static economic resilience : an instantaneous measure of the performance of an entity or system relative to a non-resilient or fragile performance (e.g., where total productive capacity is lost).

dynamic economic resilience: the speed at which an entity or system recovers from a severe shock to achieve a desired state.

Shock occurs

Recovery because of customers

Weakening of demand-side

resilience

Dynamic resilience:

reconstruction

More Complex

Consequently, our framework features a qualitative analysis qualitative analysis component that can be used to explain the results of quantitative measurementsquantitative measurements or can take the place of quantitative results when no data no data are available.

Adaptive Capacity

Restorative Capacity

Absorptive Capacity

(1) Robustness(1) Robustness (2) Rapidity(2) Rapidity (3) Resourcefulness(3) Resourcefulness (4) Redundancy(4) Redundancy

(1) Adaptive resource(1) Adaptive resource substitutionsubstitution(2) Adaptive import substitution(2) Adaptive import substitution(3) Adaptive conservation(3) Adaptive conservation

Time

Fu

nct

ion

alit

y

t event

Recovery Time

t recovery

Vu

lner

abil

ity

Reduce the damage at failure

Time

Fu

nct

ion

alit

y

t event

Recovery Time

Resilience

t recovery

Vu

lner

abil

ity

Reduce the time to recovery

Time

Fu

nct

ion

alit

y

t event

Recovery Time

t recovery

Vu

lner

abil

ity

Resilience

Social Development

Neglecting

ConclusionConclusion ConclusionConclusion

Economic resilience crucial for developing countries because of high economic vulnerability

Economic vulnerability is the key to achieving resistive economy and stable development and is a good criteria for measuring the degree of resistive economy

Considering economic resilience in policies, will result in sound decision making and avoid short-term decisions based on guess or feeling and insularity

Macroeconomic resilience is a function of economic resilience implemented by systems and organizations