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Costly disasters, energy consumption, and the role of fiscal policy

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  • Canova, Fabio
  • Pappa, Evi

Abstract

We examine the dynamic effects of natural disasters in US states and relate them to fiscal policy. Not all disasters are equally costly: only those impacting energy usage have negative output, income and unemployment consequences. Energy responses correlate with the quality of power infrastructures, the share of home ownership, and public insurance policies. The strictness of the budget rules or the presence of budget stabilization funds are irrelevant to determine the depth of the recession. Counter cyclical fiscal policy reduces the severity of the real downfall. Federal aid is crucial in reducing the negative consequences of disasters.

Suggested Citation

  • Canova, Fabio & Pappa, Evi, 2022. "Costly disasters, energy consumption, and the role of fiscal policy," CEPR Discussion Papers 17655, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17655
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    More about this item

    Keywords

    Natural disasters;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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