Raddatz, ClaudioMelecky, Martin2012-03-192012-03-192011-02-01https://hdl.handle.net/10986/3331Natural disasters could constitute a major shock to public finances and debt sustainability because of their impact on output and the need for reconstruction and relief expenses. This paper uses a panel vector autoregressive model to systematically estimate the impact of geological, climatic, and other types of natural disasters on government expenditures and revenues using annual data for high and middle-income countries over 1975-2008. The authors find that, on average budget, deficits increase only after climatic disasters, but for lower-middle-income countries, the increase in deficits is widespread across all events. Disasters do not lead to larger deficit increases or larger output declines in countries with higher initial government debt. Countries with higher financial development suffer smaller real consequences from disasters, but deficits expand further in these countries. Disasters in countries with high insurance penetration also have smaller real consequences but do not result in deficit expansions. From an ex-post perspective, the availability of insurance offers the best mitigation approach against real and fiscal consequences of disasters.CC BY 3.0 IGOACCESS TO CAPITALACCESS TO CREDITACCESS TO DEBT MARKETSACCESS TO FUNDSACCIDENTSAUTOREGRESSIONBANK POLICYBIASESBORROWINGBUDGET CONSTRAINTBUDGET DEFICITBUDGET DEFICITSBUSINESS CYCLECAPITAL MARKETSCAPITAL STOCKCASH PAYMENTSCDCREDIT CONSTRAINTCREDITSDAMAGESDEBTDEBT BURDENDEBT BURDENSDEBT INSTRUMENTSDEBT LEVELDEBT LEVELSDEFICIT FINANCINGDEFICITSDEPOSITDEPOSIT INTERESTDEVELOPING COUNTRIESDEVELOPMENT BANKDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDISASTER MITIGATIONDISASTER MITIGATION MEASURESDISASTER REDUCTIONDISASTER RELIEFDISASTER RESPONSEDISASTER RISKDOMESTIC DEBTDROUGHTSEARTHQUAKESECONOMETRIC ANALYSISECONOMETRICSECONOMIC ACTIVITYECONOMIC DEVELOPMENTEMERGENCY RELIEFENDOGENOUS VARIABLESEXCHANGE RATEEXOGENOUS VARIABLESEXPENDITUREEXPORTSEXTERNAL SHOCKSFAMINESFINANCIAL COSTSFINANCIAL DEVELOPMENTFINANCIAL INSTRUMENTSFINANCIAL MARKETFINANCIAL PRODUCTSFINANCIAL RESOURCESFINANCIAL RISKSFINANCIAL SUPPORTFINANCIAL SYSTEMFISCAL BURDENSFISCAL DEFICITFISCAL EFFORTFISCAL POLICYFISCAL RESOURCESFLOODSFUTURE RESEARCHGDPGDP PER CAPITAGOVERNMENT BUDGETGOVERNMENT DEBTGOVERNMENT DEFICITGOVERNMENT EXPENDITUREGOVERNMENT EXPENDITURESGOVERNMENT FINANCINGGOVERNMENT REVENUEGOVERNMENT REVENUESGOVERNMENT SPENDINGHEDGESHUMAN CAPITALHURRICANESINCOMEINCOME LEVELINCOME LEVELSINDEBTEDNESSINFLATIONINFLATION RATEINITIAL DEBTINSURANCEINSURANCE MARKETINSURANCE MARKETSINSURANCE PENETRATIONINSURANCE POLICIESINSURANCE PREMIUMINTEREST COSTSINTEREST PAYMENTSINTEREST RATEINTEREST RATE RISKINTEREST RATESINTERNATIONAL BANKINTERNATIONAL DEBTINTERNATIONAL DEBT MARKETSINTERNATIONAL ECONOMICSINTERNATIONAL FINANCIAL MARKETSINTERNATIONAL FINANCIAL STATISTICSISSUANCELESS DEVELOPED COUNTRIESLEVEL OF DEBTLLCLOW INTEREST RATESMACROECONOMIC CONDITIONSMACROECONOMIC FLUCTUATIONSMACROECONOMIC PERFORMANCEMACROECONOMIC VARIABLEMACROECONOMIC VARIABLESMACROECONOMICSMARGINAL PRODUCTMARKET DEVELOPMENTMIDDLE INCOME COUNTRIESMONETARY FUNDMONETARY POLICYMONEY MARKETMONEY MARKET RATEMONEY MARKET RATESMULTIPLIER EFFECTMULTIPLIERSNATURAL CATASTROPHESNATURAL DISASTERNATURAL DISASTERSOPEN ECONOMYOUTPUT LOSSOUTPUT LOSSESPRICE VALUESPRIVATE CREDITPUBLIC FINANCEPUBLIC FINANCESPUBLIC GOODPURCHASING POWERPURCHASING POWER PARITYREAL GDPRECEIPTSRECONSTRUCTIONRETURNRISK MANAGEMENTRISK MITIGATIONRISK PREMIUMSAFETY NETSSOURCES OF FUNDSSOVEREIGN DEBTTAXTAX COLLECTIONSTAXATIONTIDAL WAVESTOTAL DEBTVOLCANOWAGESWEALTHWEALTH EFFECTWEALTH EFFECTSWorld Bank10.1596/1813-9450-5564