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How Do International Financial Flows to Developing Countries Respond to Natural Disasters?

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Author Info

  • Antonio David

Abstract

This paper uses multivariate dynamic panel analysis to examine the response of international financial flows to natural disasters. The models estimated for a large sample of developing countries point to differentiated responses of specific types of financial flows. The results show that remittance inflows increase significantly in response to shocks to both climatic and geological disasters. The models suggest a nuanced role for foreign aid. While the responses of aid flows to natural disaster shocks in general tend not to be statistically significant, international assistance to low income countries increases following geological disaster shocks. Furthermore, the results show that typically, other private capital flows (bank lending and equity) do not attenuate the effects of disasters and in some specifications, even amplify the negative economic effects of these events. The conclusions of the paper have implications for capital/financial account management policies. In particular, countries should take their vulnerability to natural disasters into account when considering the costs and benefits of the liberalization of private capital flows.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/166.

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Length: 41
Date of creation: 01 Jul 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/166

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Related research

Keywords: Capital flows; Developing countries;

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Cited by:
  1. Naudé, Wim & Bezuidenhout, Henri, 2012. "Remittances provide resilience against disasters in Africa," UNU-MERIT Working Paper Series 026, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  2. Yasser Abdih & Ralph Chami & Christian Ebeke & Adolfo Barajas, 2012. "Remittances Channel and Fiscal Impact in the Middle East, North Africa, and Central Asia," IMF Working Papers 12/104, International Monetary Fund.
  3. Jean-Louis Combes & Christian Ebeke & Mireille Ntsama Etoundi & Thierry Yogo, 2012. "Are Foreign Aid and Remittances a Hedge against Food Price Shocks in Developing Countries?," Working Papers halshs-00608128, HAL.
  4. Balli, Faruk & Basher, Syed Abul & Jean Louis, Rosmy, 2012. "Risk Sharing in the Middle East and North Africa: The Role of Remittances and Factor Incomes," MPRA Paper 40739, University Library of Munich, Germany.
  5. International Monetary Fund, 2012. "Are Foreign Aid and Remittance Inflows a Hedge against Food Price Shocks?," IMF Working Papers 12/67, International Monetary Fund.
  6. Oscar Becerra & Eduardo Cavallo & Ilan Noy, 2010. "In the Aftermath of Large Natural Disasters, what happens to foreign aid?," Working Papers 201018, University of Hawaii at Manoa, Department of Economics.

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