Growth at Risk from Natural Disasters
25 Pages Posted: 4 Feb 2022
Date Written: September 1, 2021
The paper analyzes the impact of natural disasters on per-capita GDP growth. Using a quantile regressions and growth-at-risk approach, the paper examines the impact of disasters and policy choices on the distribution of growth rather than simply its average. We find that countries that have in place disaster preparedness mechanisms and lower public debt have lower probability of witnessing a significant drop in growth as a consequence of a natural disaster, but our innovative methodology in this paper finds that the two policies are complements since their effectiveness vary across different disaster scenarios. While both are helpful for small to mid-size disasters, lower debt—and hence more fiscal space—is more beneficial in the face of very large disasters. A balanced strategy would thus involve both policies.
Keywords: disaster preparedness, impact of disaster, quantile regression, impact of natural disaster, regression estimator, Natural disasters, Fiscal space, Caribbean
JEL Classification: E62, E63, H60, O40, Q54, H63
Suggested Citation: Suggested Citation