Growth at Risk from Natural Disasters

By Tamim Bayoumi, Saad N Quayyum, Sibabrata Das

September 17, 2021

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Tamim Bayoumi, Saad N Quayyum, and Sibabrata Das. Growth at Risk from Natural Disasters, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Environment, Fiscal policy, Fiscal space, Natural disasters, Public debt

Keywords: Caribbean, Disaster preparedness, Fiscal space, Impact of disaster, Impact of natural disaster, Natural disasters, Quantile regression, Regression estimator

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/234
Stock No:

WPIEA2021234
ISBN:

9781513597652
ISSN:

1018-5941

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