Relevance of financial development and fiscal stability in dealing with disasters in Emerging Economies

Valeria Terrones and Richard Tol
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Valeria Terrones: Department of Economics, University of Sussex, BN1 9SL Falmer, United Kingdom

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: The present research highlights the relevance of financial development and fiscal stability to deal with extreme events in emerging countries. McDermott, Barry, and Tol (2014) find that extreme events have persistent negative effects in the medium term in countries with low levels of financial development. In addition to this result, the role of fiscal stability in economic growth when severe events occur is studied in the present document. We find that both are relevant in the case of emerging economies, and policies have to be oriented on both fronts. A specific financial instrument, catastrophic bonds, has contributed to avoiding a negative impact on economic growth in advanced economies between its creation in 1997 and 2020, which suggests a feasible alternative for emerging economies.

Keywords: Disasters; ·; Financial; development; ·; Fiscal; stability; ·; Catastrophe; bonds; ·; Disaster; risk; management; ·; Climate; change (search for similar items in EconPapers)
JEL-codes: E17 E62 G00 G20 H30 Q54 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (1)

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Working Paper: Relevance of financial development and fiscal stability in dealing with disasters in Emerging Economies (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:0722

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