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Natural disasters and financial stress: can macroprudential regulation tame green swans?

Author

Listed:
  • Pauline Avril

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne)

  • Grégory Levieuge

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, Banque de France)

  • Camelia Turcu

    (LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne)

Abstract

We empirically investigate the impact of natural disasters on the external finance premium (EFP), conditional on the rigorously implemented macroprudential regulation at the national level. Natural disaster intensity is measured using a unique set of geophysical indicators for a sample of 88 countries over the period 1996–2016. Using local projections, we show that the EFP rises significantly following storms when macroprudential regulation is lax, with this adverse financial impact increasing over time. By contrast, a strictly enforced macroprudential framework, especially one based on bank-oriented instruments, enhances systemic resilience and prevents financing conditions from tightening nationwide; in some cases, the EFP may even decline, particularly in middle-income countries and in response to extreme events. Finally, macroprudential stringency appears less critical in the case of floods, as their predictability may generally foster self-discipline.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Pauline Avril & Grégory Levieuge & Camelia Turcu, 2025. "Natural disasters and financial stress: can macroprudential regulation tame green swans?," Post-Print hal-05029361, HAL.
    • Handle: RePEc:hal:journl:hal-05029361
    DOI: 10.1016/j.jimonfin.2025.103325
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    Cited by:

    1. Nistor, Simona & Fărcaș, Ioana Georgiana, 2025. "Does national culture affect macroprudential policy? An international investigation of regulatory behavior on macroprudential interventions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 45(C).
    2. Nabil Daher, 2024. "Is growth at risk from natural disasters? Evidence from quantile local projections," French Stata Users' Group Meetings 2024 12, Stata Users Group.
    3. Fabrizio Ferriani & Andrea Gazzani & Filippo Natoli, 2023. "Flight to climatic safety: local natural disasters and global portfolio flows," Temi di discussione (Economic working papers) 1420, Bank of Italy, Economic Research and International Relations Area.
    4. Bodenstein, Martin & Scaramucci, Mikaël, 2025. "On the GDP effects of severe physical hazards," European Economic Review, Elsevier, vol. 175(C).
    5. Nabil Daher, 2025. "Is growth at risk from natural disasters ? Evidence from quantile local projections," EconomiX Working Papers 2025-9, University of Paris Nanterre, EconomiX.
    6. Nabil Daher, 2024. "Is growth at risk from natural disasters? Evidence from quantile local projections," Working Papers 2024.8, International Network for Economic Research - INFER.
    7. Jude, Cristina & Levieuge, Grégory, 2025. "Doubling down: The synergy of CCyB release and monetary policy easing," Journal of International Money and Finance, Elsevier, vol. 155(C).

    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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