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The economic impact of floods

Author

Listed:
  • Fernandez, Guzman Gonzalez-Torres
  • Parker, Miles

Abstract

Major floods have become recurrent events in Europe and their frequency is set to increase with climate change. Drawing on several pieces of ECB analysis, we show that the economic effects depend largely on economic and institutional factors at the regional level. There is evidence of high-income regions “building back better”, whereas lower-income regions can suffer prolonged periods of lower activity. Insurance and spending on adaptation measures like flood defences can already contain the potential damages from further extreme weather events in the near future. JEL Classification: D24, E24, J22, R11, Q54

Suggested Citation

  • Fernandez, Guzman Gonzalez-Torres & Parker, Miles, 2025. "The economic impact of floods," Economic Bulletin Boxes, European Central Bank, vol. 1.
    • Handle: RePEc:ecb:ecbbox:2025:0001:4
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    File URL: https://www.ecb.europa.eu//press/economic-bulletin/focus/2025/html/ecb.ebbox202501_04~ff5de054b8.en.html
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    More about this item

    Keywords

    climate change; floods;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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