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

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  • David Antonio C.

    () (International Monetary Fund)

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, thus confirming their compensatory nature. 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.

Suggested Citation

  • David Antonio C., 2011. "How do International Financial Flows to Developing Countries Respond to Natural Disasters?," Global Economy Journal, De Gruyter, vol. 11(4), pages 1-38, December.
  • Handle: RePEc:bpj:glecon:v:11:y:2011:i:4:n:1
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    References listed on IDEAS

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    Cited by:

    1. Bharati Basu & James T. Bang, 2013. "Insurance and remittances: New evidence from Latin American immigrants to the US," Migration Letters, Transnational Press London, UK, vol. 10(3), pages 383-398, September.
    2. Cécile Couharde & Rémi Generoso, 2015. "Hydro-climatic thresholds and economic growth reversals in developing countries: an empirical investigation," EconomiX Working Papers 2015-26, University of Paris Nanterre, EconomiX.
    3. Christian EBEKE, 2011. "Does the dual-citizenship recognition determine the level and the utilization of international remittances? Cross-Country Evidence," Working Papers 201102, CERDI.
    4. Oscar Becerra & Eduardo Cavallo & Ilan Noy, 2014. "Foreign Aid in the Aftermath of Large Natural Disasters," Review of Development Economics, Wiley Blackwell, vol. 18(3), pages 445-460, August.
    5. Christian Ebeke & Jean-Louis Combes, 2013. "Do remittances dampen the effect of natural disasters on output growth volatility in developing countries?," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2241-2254, June.
    6. Jean-Louis COMBES & Christian EBEKE & Mireille NTSAMA ETOUNDI, 2011. "Are Foreign Aid and Remittances a Hedge against Food Price Shocks in Developing Countries?," Working Papers 201121, CERDI.
    7. Yasser Abdih & Ralph Chami & Christian H 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.
    8. Naudé, Wim & Bezuidenhout, Henri, 2012. "Remittances provide resilience against disasters in Africa," MERIT Working Papers 026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Immaculate Machasio, 2016. "Do Remittance Flows Stabilize Developing Countries in the aftermath of Sovereign Defaults?," MAGKS Papers on Economics 201639, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Kim, Youngwan & Nunnenkamp, Peter & Bagchi, Chandreyee, 2014. "Natural disasters and private donations to NGOs: The effects of being present after the Tsunami in the Indian Ocean," Kiel Working Papers 1890, Kiel Institute for the World Economy (IfW).
    11. Combes, Jean-Louis & Ebeke, Christian Hubert & Etoundi, Sabine Mireille Ntsama & Yogo, Thierry Urbain, 2014. "Are Remittances and Foreign Aid a Hedge Against Food Price Shocks in Developing Countries?," World Development, Elsevier, vol. 54(C), pages 81-98.
    12. Christian Hubert Ebeke, 2011. "Remittances, Countercyclicality, Openness and Government Size," Recherches économiques de Louvain, De Boeck Université, vol. 77(4), pages 89-114.
    13. 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.
    14. Giulia Bettin & Alberto Zazzaro, 2016. "The Impact of Natural Disasters on Remittances to Low- and Middle-income Countries," CSEF Working Papers 431, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    15. BORJA, Karla, 2013. "Home And Host Country Business Cycles And Remittances: The Case Of El Salvador And The Dominican Republic," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 101-118.
    16. International Monetary Fund, 2012. "Are Foreign Aid and Remittance Inflows a Hedge Against Food Price Shocks?," IMF Working Papers 12/67, International Monetary Fund.
    17. 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.
    18. Wim Naudé & Henri Bezuidenhout, 2014. "Migrant Remittances Provide Resilience Against Disasters in Africa," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(1), pages 79-90, March.

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