Enhancing Macroeconomic Resilience to Natural Disasters and Climate Change in the Small States of the Pacific

IMF Working Paper No. 15/125

37 Pages Posted: 2 Jul 2015

See all articles by Ezequiel R. Cabezon

Ezequiel R. Cabezon

International Monetary Fund

Leni Hunter

International Monetary Fund (IMF)

Patrizia Tumbarello

International Monetary Fund (IMF) Asia and Pacific Department

Kazuaki Washimi

International Monetary Fund (IMF)

Yiqun Wu

International Monetary Fund (IMF)

Date Written: July 1, 2015

Abstract

Natural disasters and climate change are interrelated macro-critical issues affecting all Pacific small states to varying degrees. In addition to their devastating human costs, these events damage growth prospects and worsen countries’ fiscal positions. This is the first cross-country IMF study assessing the impact of natural disasters on growth in the Pacific islands as a group. A panel VAR analysis suggests that, for damage and losses equivalent to 1 percent of GDP, growth drops by 0.7 percentage point in the year of the disaster. We also find that, during 1980-2014, trend growth was 0.7 percentage point lower than it would have been without natural disasters. The paper also discusses a multi-pillar framework to enhance resilience to natural disasters at the national, regional, and multilateral levels and the importance of enhancing countries’ risk-management capacities. It highlights how this approach can provide a more strategic and less ad hoc framework for strengthening both ex ante and ex post resilience and what role the IMF can play.

Keywords: Climatic changes, Pacific Island Countries, Small states, natural disasters, Emergency assistance, IMF role

JEL Classification: Q54; O44; H84; F33

Suggested Citation

Cabezon, Ezequiel R. and Hunter, Leni and Tumbarello, Patrizia and Washimi, Kazuaki and Wu, Yiqun, Enhancing Macroeconomic Resilience to Natural Disasters and Climate Change in the Small States of the Pacific (July 1, 2015). IMF Working Paper No. 15/125. Available at SSRN: https://ssrn.com/abstract=2625426 or http://dx.doi.org/10.2139/ssrn.2625426

Ezequiel R. Cabezon

International Monetary Fund ( email )

Chapel Hill, NC 27599
United States

Leni Hunter

International Monetary Fund (IMF) ( email )

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

Patrizia Tumbarello (Contact Author)

International Monetary Fund (IMF) Asia and Pacific Department ( email )

700 19th St. NW
Washington, DC 20431
United States

Kazuaki Washimi

International Monetary Fund (IMF) ( email )

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

Yiqun Wu

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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