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http://ssrn.com/abstract=1402582
 
 

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The Impact of Extreme Weather Events on Budget Balances and Implications for Fiscal Policy


Eliza M. Lis


WHU-Otto Beisheim School of Management

Christiane Nickel


European Central Bank (ECB)

May 27, 2009

ECB Working Paper No. 1055

Abstract:     
This paper explores implications of climate change for fiscal policy by assessing the impact of large scale extreme weather events on changes in public budgets. We apply alternative measures for large scale extreme weather events and conclude that the budgetary impact of such events ranges between 0.23% and 1.1% of GDP depending on the country group. Developing countries face a much larger effect on changes in budget balances following an extreme weather event than do advanced economies. Based on these findings, we discuss implications for fiscal policy and publicly-provided disaster insurance. Our policy conclusions point to the enhanced need to reach and maintain sound fiscal positions given that climate change is expected to cause an increase in the frequency and severity of natural disasters.

Number of Pages in PDF File: 47

Keywords: Global warming, climate change, fiscal sustainability, disasters

JEL Classification: Q54, Q58, F59, H87

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Date posted: May 28, 2009  

Suggested Citation

Lis, Eliza M. and Nickel, Christiane, The Impact of Extreme Weather Events on Budget Balances and Implications for Fiscal Policy (May 27, 2009). ECB Working Paper No. 1055. Available at SSRN: http://ssrn.com/abstract=1402582

Contact Information

Eliza M. Lis
WHU-Otto Beisheim School of Management ( email )
Burgplatz 2
Vallendar, 56179
Germany
Christiane Nickel (Contact Author)
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany

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