IDEAS home Printed from https://ideas.repec.org/b/wbk/wbpubs/9381.html
   My bibliography  Save this book

Financial and Fiscal Instruments for Catastrophe Risk Management : Addressing Losses from Flood Hazards in Central Europe

Author

Listed:
  • John Pollner

Abstract

This report addresses the large flood exposures of Central Europe and proposes efficient financial and risk transfer mechanisms to mitigate fiscal losses from natural catastrophes. In particular, the Visegrad countries (V-4) of Central Europe, namely, Poland, the Czech Republic, Hungary, and the Slovak Republic, have such tremendous potential flood damages that reliance on budgetary appropriations or even European Union (EU) funds in such circumstances becomes ineffective and does not provide needed cash funds for the quick response and recovery needed to minimize economic disruptions. The report is primarily addressed to the governments of the region, which should build into their fiscal planning the necessary contingent funding mechanisms, based on their exposures. The report is addressed to finance ministries and also to the insurance and securities regulators and the private insurance and capital markets, which may all play a role in the proposed mechanisms. An arrangement using a multi-country pool with a hazard-triggered insurance payout mechanism complemented by contingent financing is proposed, to better manage these risks and avoid major fiscal volatility and disruption.

Suggested Citation

  • John Pollner, 2012. "Financial and Fiscal Instruments for Catastrophe Risk Management : Addressing Losses from Flood Hazards in Central Europe," World Bank Publications - Books, The World Bank Group, number 9381.
    • Handle: RePEc:wbk:wbpubs:9381
    as

    Download full text from publisher

    File URL: https://openknowledge.worldbank.org/bitstream/handle/10986/9381/709110PUB0EPI0067869B09780821395790.pdf?sequence=1
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ugo Panizza & Federico Sturzenegger & Jeromin Zettelmeyer, 2009. "The Economics and Law of Sovereign Debt and Default," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 651-698, September.
    2. 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.
    3. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
    4. Ahmed, Shaghil, 2003. "Sources of economic fluctuations in Latin America and implications for choice of exchange rate regimes," Journal of Development Economics, Elsevier, vol. 72(1), pages 181-202, October.
    5. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    6. Uribe, Martin & Yue, Vivian Z., 2006. "Country spreads and emerging countries: Who drives whom?," Journal of International Economics, Elsevier, vol. 69(1), pages 6-36, June.
    7. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    8. 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, 09.
    9. Peter Höppe & Tobias Grimm, 2008. "Rising natural catastrophe losses – what is the role of climate change?," Springer Books, in: Bernd Hansjürgens & Ralf Antes (ed.), Economics and Management of Climate Change, pages 13-22, Springer.
    10. Ramcharan, Rodney, 2007. "Does the exchange rate regime matter for real shocks? Evidence from windstorms and earthquakes," Journal of International Economics, Elsevier, vol. 73(1), pages 31-47, September.
    11. Ilzetzki, Ethan & Mendoza, Enrique G. & Végh, Carlos A., 2013. "How big (small?) are fiscal multipliers?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 239-254.
    12. Toya, Hideki & Skidmore, Mark, 2007. "Economic development and the impacts of natural disasters," Economics Letters, Elsevier, vol. 94(1), pages 20-25, January.
    13. Robertson, D & Symons, J, 1992. "Some Strange Properties of Panel Data Estimators," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 175-189, April-Jun.
    14. Norman V. Loayza & Claudio Raddatz, 2007. "The Structural Determinants of External Vulnerability," The World Bank Economic Review, World Bank, vol. 21(3), pages 359-387, October.
    15. Pollner, John D, 2001. "Catastrophe risk management : using alternative risk financing and insurance pooling mechanisms," Policy Research Working Paper Series 2560, The World Bank.
    16. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    17. Broda, Christian, 2004. "Terms of trade and exchange rate regimes in developing countries," Journal of International Economics, Elsevier, vol. 63(1), pages 31-58, May.
    18. Adolfson, Malin, 2001. "Monetary Policy with Incomplete Exchange Rate Pass-Through," SSE/EFI Working Paper Series in Economics and Finance 476, Stockholm School of Economics.
    19. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    20. Jesper Lindé & Marianne Nessén & Ulf Söderström, 2009. "Monetary policy in an estimated open-economy model with imperfect pass-through," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(4), pages 301-333.
    21. 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.
    22. World Bank, 2001. "Kyrgyz Republic : Fiscal Sustainability Study," World Bank Publications - Books, The World Bank Group, number 14031.
    23. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    24. Mr. Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 2004/224, International Monetary Fund.
    25. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    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. World Bank Group, 2014. "Insurance against Climate Change : Financial Disaster Risk Management and Insurance Options for Climate Change Adaptation in Bulgaria," World Bank Publications - Reports 18940, The World Bank Group.
    2. Hana Bártová, 2017. "Influence of Catastrophe Risk on Insurance and Reinsurance Markets," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2017(4), pages 47-65.
    3. Lee, Chien-Chiang & Wang, Chih-Wei & Ho, Shan-Ju & Wu, Ting-Pin, 2021. "The impact of natural disaster on energy consumption: International evidence," Energy Economics, Elsevier, vol. 97(C).
    4. Tesselaar, Max & Botzen, W.J. Wouter & Robinson, Peter J. & Aerts, Jeroen C.J.H. & Zhou, Fujin, 2022. "Charity hazard and the flood insurance protection gap: An EU scale assessment under climate change," Ecological Economics, Elsevier, vol. 193(C).
    5. Anna Timonina & Stefan Hochrainer‐Stigler & Georg Pflug & Brenden Jongman & Rodrigo Rojas, 2015. "Structured Coupling of Probability Loss Distributions: Assessing Joint Flood Risk in Multiple River Basins," Risk Analysis, John Wiley & Sons, vol. 35(11), pages 2102-2119, November.

    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. Raddatz, Claudio, 2009. "The wrath of God : macroeconomic costs of natural disasters," Policy Research Working Paper Series 5039, The World Bank.
    2. Dybczak, Kamil & Melecky, Martin, 2014. "EU fiscal stance vulnerability: Are the old members the gold members?," Economic Modelling, Elsevier, vol. 38(C), pages 87-101.
    3. 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.
    4. 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.
    5. 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.
    6. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters - A Survey," Working Papers 200919, University of Hawaii at Manoa, Department of Economics.
    7. Yanos Zylberberg, 2010. "Natural natural disasters and economic disruption," PSE Working Papers halshs-00564946, HAL.
    8. 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.
    9. Matthew A. COLE & Robert J R ELLIOTT & OKUBO Toshihiro & Eric STROBL, 2013. "Natural Disasters and Plant Survival: The impact of the Kobe earthquake," Discussion papers 13063, Research Institute of Economy, Trade and Industry (RIETI).
    10. Matthew A. COLE & Robert J R ELLIOTT & OKUBO Toshihiro & Eric STROBL, 2015. "Natural Disasters, Industrial Clusters and Manufacturing Plant Survival," Discussion papers 15008, Research Institute of Economy, Trade and Industry (RIETI).
    11. Yanos Zylberberg, 2010. "Natural natural disasters and economic disruption," Working Papers halshs-00564946, HAL.
    12. Eduardo Cavallo & Ilan Noy, 2010. "The Aftermath of Natural Disasters: Beyond Destruction," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(2), pages 25-35, July.
    13. 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.
    14. Ruohan Wu, 2023. "Natural disasters, climate change, and structural transformation: A new perspective from international trade," The World Economy, Wiley Blackwell, vol. 46(5), pages 1333-1377, May.
    15. I. Koetsier, 2017. "The fiscal impact of natural disasters," Working Papers 17-17, Utrecht School of Economics.
    16. Dybczak, Kamil & Melecky, Martin, 2011. "Macroeconomic Shocks and the Fiscal Stance within the EU: A Panel Regression Analysis," MPRA Paper 33684, University Library of Munich, Germany.
    17. Klomp, Jeroen, 2020. "Do natural disasters affect monetary policy? A quasi-experiment of earthquakes," Journal of Macroeconomics, Elsevier, vol. 64(C).
    18. van Bergeijk, P.A.G. & Lazzaroni, S., 2013. "Macroeconomics of natural disasters," ISS Working Papers - General Series 50075, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    19. -, 2014. "Handbook for disaster assessment," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 36823 edited by Eclac.
    20. Jesus Crespo Cuaresma, 2010. "Natural Disasters and Human Capital Accumulation," The World Bank Economic Review, World Bank, vol. 24(2), pages 280-302, July.

    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:wbk:wbpubs:9381. 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: Tal Ayalon (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    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.