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Impact of hurricanes strikes on international reserves in the Caribbean

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  • Eric Strobl
  • Bazoumana Ouattara
  • Sandrine Akassi Kablan

Abstract

In this study, we investigate the impacts of hurricane shocks on the international reserves of Caribbean countries. To this end, we use a panel VARX (Vector Auto-Regressive, with exogenous variables) with monthly data that allow us to account for external shocks (hurricane strikes). Our results show that for the whole sample, an increase in foreign reserves a month after the strike was followed by a decrease 2 months later. The increase can be explained by remittances and emergency foreign aid granted by the International Monetary Fund. Dividing the sample into middle-income and high-income countries shows that the increase is mainly due to the latter. This outcome may not be surprising given that production in Caribbean high-income countries is mainly due to manufacturing, off-shore banking and natural resources exploitation, which are all non-weather dependent sectors, while the middle-income countries are mostly dependent on weather-prone agriculture and tourism.

Suggested Citation

  • Eric Strobl & Bazoumana Ouattara & Sandrine Akassi Kablan, 2020. "Impact of hurricanes strikes on international reserves in the Caribbean," Applied Economics, Taylor & Francis Journals, vol. 52(38), pages 4175-4185, July.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:38:p:4175-4185
    DOI: 10.1080/00036846.2020.1731411
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    Cited by:

    1. Khan, Muhammad Tariq Iqbal & Anwar, Sofia, 2022. "Natural disasters and foreign exchange reserves: The role of renewable energy and human capital," Renewable Energy, Elsevier, vol. 192(C), pages 838-848.
    2. Quy Ta & Yothin Jinjarak & Ilan Noy, 2022. "“How Do Shocks Affect International Reserves? A Quasi-Experiment of Earthquakes”," Open Economies Review, Springer, vol. 33(5), pages 945-971, November.
    3. Zhao, Xin-Xin & Zheng, Mingbo & Fu, Qiang, 2022. "How natural disasters affect energy innovation? The perspective of environmental sustainability," Energy Economics, Elsevier, vol. 109(C).

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