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Macroeconomic Modeling of Managing Hurricane Damage in the Caribbean : The Case of Jamaica

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  • Burns,Andrew
  • Jooste,Charl
  • Schwerhoff,Gregor

Abstract

This paper describes a modeling methodology that embeds climate damages from natural disasters and risk management strategies into a macroeconomic model for Jamaica. The modeled damages take the form of capital destruction, and the risk management strategies considered are (i) adaptation investment in hurricane resilient infrastructure, (ii) commercial disaster insurance for the government, (iii) the formation of a contingency fund, and (iv) lower debt via higher future primary balances to create fiscal space for disaster recovery. Different risk management strategies are compared to a baseline of no risk management. The model behavior is estimated empirically on country-specific data. Hurricane damage and the model results are analyzed in deterministic and probabilistic settings, using the historical distribution of damages for Jamaica.

Suggested Citation

  • Burns,Andrew & Jooste,Charl & Schwerhoff,Gregor, 2021. "Macroeconomic Modeling of Managing Hurricane Damage in the Caribbean : The Case of Jamaica," Policy Research Working Paper Series 9505, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9505
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    References listed on IDEAS

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    1. Francesco Bosello & Carlo Carraro & Enrica De Cian, 2010. "Climate Policy And The Optimal Balance Between Mitigation, Adaptation And Unavoided Damage," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 71-92.
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    3. Ganelli, Giovanni & Tervala, Juha, 2010. "Public infrastructures, public consumption, and welfare in a new-open-economy-macro model," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 827-837, September.
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    5. Hallegatte,Stephane & Vogt-Schilb,Adrien Camille, 2016. "Are losses from natural disasters more than just asset losses ? the role of capital aggregation, sector interactions, and investment behaviors," Policy Research Working Paper Series 7885, The World Bank.
    6. Millner, Antony & Dietz, Simon, 2015. "Adaptation to climate change and economic growth in developing countries," Environment and Development Economics, Cambridge University Press, vol. 20(3), pages 380-406, June.
    7. Froot, Kenneth A., 2001. "The market for catastrophe risk: a clinical examination," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 529-571, May.
    8. Mr. Sebastian Acevedo Mejia, 2016. "Gone with the Wind: Estimating Hurricane and Climate Change Costs in the Caribbean," IMF Working Papers 2016/199, International Monetary Fund.
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