Natural Disasters and Fiscal Drought
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World Bank, Washington, DC
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This paper examines to what extent
slowdowns in economic growth after natural disasters are
accompanied by widening fiscal deficits and corresponding
pressures on public debt. Empirical analysis based on
exogenous measures of physical disaster intensity shows that
natural disasters lead not only to output losses but also to
further deterioration of countries’ fiscal positions. The
effects are persistent and driven by developments in
emerging markets and developing economies. A dynamic
stochastic general equilibrium model is used to show the
propagation mechanism of an extreme event that affects
agricultural productivity. The model features farmers
endowed with land with time-varying productivity subject to
economic and weather conditions. Simulation results
illustrate the climate-fiscal nexus existence and highlight
the role of structural resilience in limiting the impact of
natural disasters.
Palabras clave
AGRICULTURAL IMPACT OF NATURAL DISASTERS, CLIMATE-FISCAL NEXUS, STRUCTURAL RESILIENCE, NATURAL DISASTERS, FISCAL SUSTAINABILITY, CLIMATE CHANGE