The Impact of Disasters on Inflation

Abstract

This paper studies how disasters affect consumer price inflation, one of the main remaining gaps in our understanding of the impact of disasters. There is a marked heterogeneity in the impact between advanced economies, where the impact is negligible, and developing economies, where the impact can last for several years. There are also differences in the impact by type of disasters, particularly when considering inflation sub-indices. Storms increase food price inflation in the near term, although the effect dissipates within a year. Floods also typically have a short-run impact on inflation. Earthquakes reduce CPI inflation excluding food, housing and energy.

Keywords: inflation, disasters

JEL Classification: E31, Q54