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Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans?

Author

Listed:
  • Pauline Avril

    (Université d'Orléans)

  • Gregory Levieuge

    (Banque de France, Université d'Orléans)

  • Camelia Turcu

    (Université d'Orléans)

Abstract

We empirically investigate the impact of natural disasters on the external finance premium (EFP), conditional on the stringency of macroprudential regulation. The intensity of natural disasters is measured through an original set of geophysical indicators for a sample of 88 countries over the period 1996-2016. Using local projections, we show that, following storms, the EFP significantly drops (rises) when macroprudential regulation is stringent (lax). This suggests that regulated financial systems could foster favorable financing conditions to replace destroyed capital with more productive capital. Macroprudential stringency seems less crucial in the case of floods, the predictability of which may prompt self-discipline.

Suggested Citation

  • Pauline Avril & Gregory Levieuge & Camelia Turcu, 2021. "Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans?," Working Papers 2021.13, International Network for Economic Research - INFER.
    • Handle: RePEc:inf:wpaper:2021.13
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    2. 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.
    3. 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).
    4. 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).
    5. Bodenstein, Martin & Scaramucci, Mikaël, 2025. "On the GDP effects of severe physical hazards," European Economic Review, Elsevier, vol. 175(C).
    6. 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.
    7. Damette, O. & Fajeau, M. & Mathonnat, C., 2026. "Climate shocks and banking sector stability: Evidence from El Niño southern oscillation," Ecological Economics, Elsevier, vol. 239(C).
    8. 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.
    9. 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.

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    JEL classification:

    • E - Macroeconomics and Monetary Economics

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