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Natural Disasters and Scarring Effects

Author

Listed:
  • Weicheng Lian
  • Jose Ramon Moran
  • Raadhika Vishvesh

Abstract

This paper uses a novel empirical approach, following the literature on hysteresis, to explore medium-term scarring of natural disasters for countries vulnerable to climate change. By quantifying the dynamic effects of natural disasters on real GDP per capita for a large number of episodes using a synthetic control approach (SCA) and focusing on severe shocks, we demonstrate that a persistently large deviation of real GDP per capita from the counterfacutal trend exists five years after a severe shock in many countries. The findings highlight the importance and urgency of building ex-ante resilience to avoid scarring effects for countries prone to natural disasters, such as those in the Caribbean region.

Suggested Citation

  • Weicheng Lian & Jose Ramon Moran & Raadhika Vishvesh, 2022. "Natural Disasters and Scarring Effects," IMF Working Papers 2022/253, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/253
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