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Assessment of the Banking Sector’s Exposure to Hydrometeorological Events in Costa Rica

Author

Listed:
  • Irene Alvarado-Quesada

    (Department of Economic Research, Central Bank of Costa Rica)

  • Jose Pablo Barquero-Romero

    (Department of Economic Research, Central Bank of Costa Rica)

  • Cristian Sancho-Brenes

    (Department of Economic Research, Central Bank of Costa Rica)

Abstract

This study examines, for the first time, the exposure of the credit portfolio of the banking system in Costa Rica to hydrometeorological events, specifically excess rainfall events, with a focus on firm credit at the canton level. We propose a credit risk indicator to identify cantons with credit portfolios that are more affected by rainfall events. Moreover, we introduce a novel approach with respect to firm level data to assign a single productive location to firms with two or more establishments. We find that cantons with the highest number of excess rainfall events represent a small share of the average credit balance of the country. Furthermore, we observe that the top three cantons with the highest credit risk score are driven by economic activities that are not expected to be notably vulnerable to extreme rainfall.

Suggested Citation

  • Irene Alvarado-Quesada & Jose Pablo Barquero-Romero & Cristian Sancho-Brenes, 2024. "Assessment of the Banking Sector’s Exposure to Hydrometeorological Events in Costa Rica," Ensayos de Política Económica 2401, Banco Central de Costa Rica.
    • Handle: RePEc:apk:epolec:2401
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    File URL: https://repositorioinvestigaciones.bccr.fi.cr/handle/20.500.12506/398
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    References listed on IDEAS

    as
    1. Nicol√°s de Roux, 2021. "Exogenous shocks, credit reports and access to credit: Evidence from colombian coffee producers," Documentos CEDE 19769, Universidad de los Andes, Facultad de Economía, CEDE.
    2. Romero, José Vicente & Naranjo-Saldarriaga, Sara, 2024. "Weather shocks and inflation expectations in semi-structural models," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(2).
    3. Aguilar-Gomez, Sandra & Gutierrez, Emilio & Heres, David & Jaume, David & Tobal, Martin, 2024. "Thermal stress and financial distress: Extreme temperatures and firms’ loan defaults in Mexico," Journal of Development Economics, Elsevier, vol. 168(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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