Unmitigated Disasters? New Evidence on the Macroeconomic Cost of Natural Catastrophes

38 Pages Posted: 5 Jan 2013

See all articles by Goetz von Peter

Goetz von Peter

Bank for International Settlements - Research and Policy Analysis

Sebastian von Dahlen

Bank for International Settlements (BIS)

Sweta C. Saxena

International Monetary Fund (IMF)

Date Written: December 1, 2012

Abstract

This paper presents a large panel study on the macroeconomic consequences of natural catastrophes and analyses the extent to which risk transfer to insurance markets facilitates economic recovery. Our main results are that major natural catastrophes have large and significant negative effects on economic activity, both on impact and over the longer run. However, it is mainly the uninsured losses that drive the subsequent macroeconomic cost, whereas sufficiently insured events are inconsequential in terms of foregone output. This result helps to disentangle conflicting findings in the literature, and puts the focus on risk transfer mechanisms to help mitigate the macroeconomic costs of natural catastrophes.

Keywords: Natural catastrophes, disasters, economic growth, insurance, risk transfer, reinsurance, recovery, development

JEL Classification: G22, O11, O44, Q54

Suggested Citation

von Peter, Goetz and von Dahlen, Sebastian and Saxena, Sweta C., Unmitigated Disasters? New Evidence on the Macroeconomic Cost of Natural Catastrophes (December 1, 2012). BIS Working Paper No. 394, Available at SSRN: https://ssrn.com/abstract=2195975

Goetz Von Peter (Contact Author)

Bank for International Settlements - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
+ 41 61 280 8840 (Phone)

HOME PAGE: http://www.bis.org/author/goetz_von_peter.htm

Sebastian Von Dahlen

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Sweta C. Saxena

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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