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Natural disasters and (future) government debt

In: Public or Private Goods?

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  • Ian Koetsier

Abstract

Natural disaster relief and reconstruction are core tasks of the government because there is no well-functioning private market, and for macroeconomic stability reasons. Providing disaster relief and reconstruction is not without consequences for the level of government debt. The debt increase ranges from 23 percentage points to 37 percentage points. For climate disaster, this chanper finds an even larger effect. This is particularly worrisome because climate change makes the occurrence of climate disasters more frequent. A country might be effectively shut out of the bond market in the aftermath of a natural disaster because investors are concerned about government debt sustainability. In that case, the government cannot fulfil its core task of natural disaster relief and reconstruction. Therefore, this chapter proposes to issue catastrophe bonds (cat bonds) and to utilize some of the fund in the Paris Agreement to mitigate the issue of debt sustainability.

Suggested Citation

  • Ian Koetsier, 2017. "Natural disasters and (future) government debt," Chapters, in: Brigitte Unger & Daan van der Linde & Michael Getzner (ed.), Public or Private Goods?, chapter 4, pages 48-74, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17233_4
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    Cited by:

    1. I. Koetsier, 2017. "The fiscal impact of natural disasters," Working Papers 17-17, Utrecht School of Economics.
    2. Kourtit, Karima & Nijkamp, Peter & Banica, Alexandru, 2023. "An analysis of natural disasters’ effects – A global comparative study of ‘Blessing in Disguise’," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).
    3. Preeya Mohan & Eric Strobl, 2021. "The impact of tropical storms on tax revenue," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(3), pages 472-489, April.
    4. Preeya Mohan & Eric Strobl, 2021. "The impact of tropical storms on the accumulation and composition of government debt," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(3), pages 483-496, June.

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    Keywords

    Economics and Finance;

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