Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model

Stefan Mittnik, Willi Semmler and Alexander Haider

No 2019/145, IMF Working Papers from International Monetary Fund

Abstract: Recent research in financial economics has shown that rare large disasters have the potential to disrupt financial sectors via the destruction of capital stocks and jumps in risk premia. These disruptions often entail negative feedback e?ects on the macroecon-omy. Research on disaster risks has also actively been pursued in the macroeconomic models of climate change. Our paper uses insights from the former work to study disaster risks in the macroeconomics of climate change and to spell out policy needs. Empirically the link between carbon dioxide emission and the frequency of climate re-lated disaster is investigated using cross-sectional and panel data. The modeling part then uses a multi-phase dynamic macro model to explore this causal nexus and the e?ects of rare large disasters resulting in capital losses and rising risk premia. Our proposed multi-phase dynamic model, incorporating climate-related disaster shocks and their aftermath as one phase, is suitable for studying mitigation and adaptation policies.

Keywords: WP; monetary policy; capital stock; low income; risk pooling; climate economics; disaster risk; macro feedbacks; multi-phase macro model; monetary and financial policies; environmental economics; bond financing; credit policy; climate finance policy; bond issuing; climate bond; Bonds; Greenhouse gas emissions; Climate change; Climate policy; Natural disasters; Central Asia; Sub-Saharan Africa; East Asia; North Africa; Middle East (search for similar items in EconPapers)
Pages: 47
Date: 2019-07-11
New Economics Papers: this item is included in nep-env and nep-rmg
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Citations: View citations in EconPapers (1)

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Journal Article: Climate Disaster Risks—Empirics and a Multi-Phase Dynamic Model (2020)
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