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Relevance of financial development and fiscal stability in dealing with disasters in Emerging Economies

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  • Valeria Terrones
  • Richard S. J. Tol

Abstract

Previous studies show that natural disasters decelerate economic growth, and more so in countries with lower financial development. We confirm these results with more recent data. We are the first to show that fiscal stability reduces the negative economic impact of natural disasters in poorer countries, and that catastrophe bonds have the same effect in richer countries.

Suggested Citation

  • Valeria Terrones & Richard S. J. Tol, 2022. "Relevance of financial development and fiscal stability in dealing with disasters in Emerging Economies," Papers 2211.08078, arXiv.org.
  • Handle: RePEc:arx:papers:2211.08078
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    1. Thomas Herndon & Michael Ash & Robert Pollin, 2014. "Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(2), pages 257-279.
    2. Borensztein, Eduardo & Cavallo, Eduardo & Jeanne, Olivier, 2017. "The welfare gains from macro-insurance against natural disasters," Journal of Development Economics, Elsevier, vol. 124(C), pages 142-156.
    3. Thomas K.J. McDermott & Frank Barry & Richard S.J. Tol, 2014. "Disasters and development: natural disasters, credit constraints, and economic growth," Oxford Economic Papers, Oxford University Press, vol. 66(3), pages 750-773.
    4. 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.
    5. Richard S. J. Tol, 2022. "State capacity and vulnerability to natural disasters," Chapters, in: Mark Skidmore (ed.), Handbook on the Economics of Disasters, chapter 20, pages 434-457, Edward Elgar Publishing.
    6. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
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    Cited by:

    1. Zhai, Wei, 2023. "Risk assessment of China's foreign direct investment in "One Belt, One Road": Taking the green finance as a research perspective," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).

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    More about this item

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G00 - Financial Economics - - General - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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