IMF Working Papers

Natural Disasters and Scarring Effects

By Weicheng Lian, Jose Ramon Moran, Raadhika Vishvesh

December 16, 2022

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Weicheng Lian, Jose Ramon Moran, and Raadhika Vishvesh. Natural Disasters and Scarring Effects, (USA: International Monetary Fund, 2022) accessed November 21, 2024

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Summary

This paper uses a novel empirical approach, following the literature on hysteresis, to explore medium-term scarring of natural disasters for countries vulnerable to climate change. By quantifying the dynamic effects of natural disasters on real GDP per capita for a large number of episodes using a synthetic control approach (SCA) and focusing on severe shocks, we demonstrate that a persistently large deviation of real GDP per capita from the counterfacutal trend exists five years after a severe shock in many countries. The findings highlight the importance and urgency of building ex-ante resilience to avoid scarring effects for countries prone to natural disasters, such as those in the Caribbean region.

Keywords: Natural disasters, Scarring effects, Synthetic control approach

Publication Details

  • Pages:

    30

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2022/253

  • Stock No:

    WPIEA2022253

  • ISBN:

    9798400227172

  • ISSN:

    1018-5941