As the death toll and the economic impact of the coronavirus outbreak won’t be known with any precision until the epidemic is over, contemplating just the impact on the stock market is instructive. Since the last week of February, U.S. markets have dropped by about 15%. That represents about half the decline that followed the Black Friday plunge of 31% and the 28% drop following the 2008 collapse of Lehman Brothers.

Researchers in Australia have modeled the potential one-year impact of the coronavirus outbreak under seven different scenarios using three measures of the epidemic’s intensity in China. The first is attack rate, the number of people who will contract the virus out of the total population. The second is the case-fatality rate, the proportion of those who die from the infection, and the third is the mortality rate, the proportion of the total population who die.

Three of the researchers’ scenarios apply only to China and the other four were modeled for the entire world. These three simulate low- to high-severity for the entire world. All six of these models simulate a one-year impact. The seventh models a low-intensity scenario (using slightly different assumptions) that is permanent, meaning that a mild pandemic recurs yearly for the indefinite future. In the seventh scenario, the one-year impacts on both life and wealth are repeated indefinitely.

According to the researchers’ simulations, a low-intensity pandemic could kill more than 15 million people, while a mid-intensity outbreak could kill nearly 38 million and a high-intensity pandemic could kill more than 68 million. The Spanish flu pandemic of 1918 and 1919 killed an estimated 20 million to 50 million people worldwide.

The loss of life would be accompanied by a sharp drop in global economic output as measured by gross domestic product. In 2019, global GDP totaled an estimated $87.3 trillion. In a low-intensity global pandemic, about $2.3 trillion (2.7%) would be lost. In a mid-intensity pandemic, the loss would rise to $5.3 trillion (6.1%), and a high-intensity pandemic would shave $9.2 trillion (10.5%) off global GDP this year.

In the United States alone, the one-year death toll would range from 236,000 to 1.1 million and the economic hit would range from $420 billion to $1.8 trillion.

In their conclusion, the authors write:

A range of policy responses will be required both in the short term as well as in the coming years. In the short term, central banks and Treasuries need to make sure that disrupted economies continue to function while the disease outbreak continues. … While cutting interest rates is a possible response for central banks, the shock is not only a demand management problem but a multifaceted crisis that will require monetary, fiscal and health policy responses. Quarantining affected people and reducing large scale social interaction is an effective response. Wide dissemination of good hygiene practices … can be a low cost and highly effective response that can reduce the extent of contagion and therefore reduce the social and economic cost.

It probably goes without saying that global fiscal and health policy responses are unlikely to cost $2.3 trillion a year. The Congress and the president have just authorized $8.3 billion to combat the coronavirus in the United States. Even if U.S. spending on fighting epidemiological threats were double or triple that, the total is a far cry from $420 billion.

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