IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2211.08078.html
   My bibliography  Save this paper

Relevance of financial development and fiscal stability in dealing with disasters in Emerging Economies

Author

Listed:
  • Valeria Terrones
  • Richard S. J. Tol

Abstract

Previous studies show that natural disasters decelerate economic growth, and more so in countries with lower financial development. We confirm these results with more recent data. We are the first to show that fiscal stability reduces the negative economic impact of natural disasters in poorer countries, and that catastrophe bonds have the same effect in richer countries.

Suggested Citation

  • Valeria Terrones & Richard S. J. Tol, 2022. "Relevance of financial development and fiscal stability in dealing with disasters in Emerging Economies," Papers 2211.08078, arXiv.org.
    • Handle: RePEc:arx:papers:2211.08078
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2211.08078
    File Function: Latest version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas Herndon & Michael Ash & Robert Pollin, 2014. "Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(2), pages 257-279.
    2. Borensztein, Eduardo & Cavallo, Eduardo & Jeanne, Olivier, 2017. "The welfare gains from macro-insurance against natural disasters," Journal of Development Economics, Elsevier, vol. 124(C), pages 142-156.
    3. Thomas K.J. McDermott & Frank Barry & Richard S.J. Tol, 2014. "Disasters and development: natural disasters, credit constraints, and economic growth," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 750-773.
    4. Eduardo Borensztein & Eduardo Cavallo & Patricio Valenzuela, 2009. "Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 12(2), pages 273-294, September.
    5. Richard S. J. Tol, 2022. "State capacity and vulnerability to natural disasters," Chapters, in: Mark Skidmore (ed.), Handbook on the Economics of Disasters, chapter 20, pages 434-457, Edward Elgar Publishing.
    6. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
    7. Mr. Andrea Pescatori & Mr. Damiano Sandri & John Simon, 2014. "Debt and Growth: Is There a Magic Threshold?," IMF Working Papers 2014/034, International Monetary Fund.
    8. Mark Skidmore & Hideki Toya, 2002. "Do Natural Disasters Promote Long-Run Growth?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 664-687, October.
    9. Raddatz, Claudio, 2007. "Are external shocks responsible for the instability of output in low-income countries?," Journal of Development Economics, Elsevier, vol. 84(1), pages 155-187, September.
    10. Andy Polacek, 2018. "Catastrophe Bonds: A Primer and Retrospective," Chicago Fed Letter, Federal Reserve Bank of Chicago.
    11. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    12. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    13. I. Koetsier, 2017. "The fiscal impact of natural disasters," Working Papers 17-17, Utrecht School of Economics.
    14. Albala-Bertrand, J. M., 1993. "Political Economy of Large Natural Disasters: With Special Reference to Developing Countries," OUP Catalogue, Oxford University Press, number 9780198287650.
    15. Hiroki Onuma & Kong Joo Shin & Shunsuke Managi, 2021. "Short-, Medium-, and Long-Term Growth Impacts of Catastrophic and Non-catastrophic Natural Disasters," Economics of Disasters and Climate Change, Springer, vol. 5(1), pages 53-70, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhai, Wei, 2023. "Risk assessment of China's foreign direct investment in "One Belt, One Road": Taking the green finance as a research perspective," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Subhani Keerthiratne & Richard S. J. Tol, 2017. "Impact of Natural Disasters on Financial Development," Economics of Disasters and Climate Change, Springer, vol. 1(1), pages 33-54, June.
    2. Noy, Ilan & Vu, Tam Bang, 2010. "The economics of natural disasters in a developing country: The case of Vietnam," Journal of Asian Economics, Elsevier, vol. 21(4), pages 345-354, August.
    3. Nadia Benali & Mounir Ben Mbarek & Rochdi Feki, 2019. "Natural Disaster, Government Revenues and Expenditures: Evidence from High and Middle-Income Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(2), pages 695-710, June.
    4. Thomas K.J. McDermott & Frank Barry & Richard S.J. Tol, 2014. "Disasters and development: natural disasters, credit constraints, and economic growth," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 750-773.
    5. Loayza, Norman V. & Olaberría, Eduardo & Rigolini, Jamele & Christiaensen, Luc, 2012. "Natural Disasters and Growth: Going Beyond the Averages," World Development, Elsevier, vol. 40(7), pages 1317-1336.
    6. Vikrant Panwar & Subir Sen, 2019. "Economic Impact of Natural Disasters: An Empirical Re-examination," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 13(1), pages 109-139, February.
    7. Thomas K.J. McDermott, "undated". "Disasters and Development: Natural Disasters, Credit Constraints and Economic Growth," The Institute for International Integration Studies Discussion Paper Series iiisdp363, IIIS.
    8. Lazzaroni, Sara & van Bergeijk, Peter A.G., 2014. "Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature," Ecological Economics, Elsevier, vol. 107(C), pages 333-346.
    9. Klomp, Jeroen, 2020. "Do natural disasters affect monetary policy? A quasi-experiment of earthquakes," Journal of Macroeconomics, Elsevier, vol. 64(C).
    10. Hiroki Onuma & Kong Joo Shin & Shunsuke Managi, 2021. "Short-, Medium-, and Long-Term Growth Impacts of Catastrophic and Non-catastrophic Natural Disasters," Economics of Disasters and Climate Change, Springer, vol. 5(1), pages 53-70, April.
    11. Brei, Michael & Mohan, Preeya & Strobl, Eric, 2019. "The impact of natural disasters on the banking sector: Evidence from hurricane strikes in the Caribbean," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 232-239.
    12. Tam Bang Vu & Calvin Luscombe & Shaun McKim, 2014. "Natural Disasters in Japan and Tourism in Developing Countries: The Case of the Pacific Islands," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 3(2), pages 98-107.
    13. Zeb Aurangzeb & Thanasis Stengos, 2012. "Economic Policies and the Impact of Natural Disasters on Economic Growth: A Threshold Regression Approach," Economics Bulletin, AccessEcon, vol. 32(1), pages 229-241.
    14. Tol, Richard S.J., 2024. "A meta-analysis of the total economic impact of climate change," Energy Policy, Elsevier, vol. 185(C).
    15. Wendala Gamaralalage Subhani Sulochana Keerthiratne, 2017. "Economic impact of natural disasters," Economics PhD Theses 0617, Department of Economics, University of Sussex Business School.
    16. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters - A Survey," Working Papers 200919, University of Hawaii at Manoa, Department of Economics.
    17. Felbermayr, Gabriel & Gröschl, Jasmin, 2014. "Naturally negative: The growth effects of natural disasters," Journal of Development Economics, Elsevier, vol. 111(C), pages 92-106.
    18. John Sseruyange & Jeroen Klomp, 2021. "Natural Disasters and Economic Growth: The Mitigating Role of Microfinance Institutions," Sustainability, MDPI, vol. 13(9), pages 1-20, April.
    19. Borensztein, Eduardo & Cavallo, Eduardo & Jeanne, Olivier, 2017. "The welfare gains from macro-insurance against natural disasters," Journal of Development Economics, Elsevier, vol. 124(C), pages 142-156.
    20. Breckner, Miriam & Englmaier, Florian & Stowasser, Till & Sunde, Uwe, 2016. "Economic Development and Resilience to Natural Catastrophes – Insurance Penetration and Institutions," VfS Annual Conference 2016 (Augsburg): Demographic Change 145501, Verein für Socialpolitik / German Economic Association.

    More about this item

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G00 - Financial Economics - - General - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2211.08078. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.