The Impact of Extreme Weather Events on Budget Balances and Implications for Fiscal Policy

Eliza M. Lis and Christiane Nickel ()
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Christiane Nickel: European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany., http://www.ecb.europa.eu/home/html/index.en.html

No 1055, Working Paper Series from European Central Bank

Abstract: This paper explores implications of climate change for fiscal policy by assessing the impact of large scale extreme weather events on changes in public budgets. We apply alternative measures for large scale extreme weather events and conclude that the budgetary impact of such events ranges between 0.23% and 1.1% of GDP depending on the country group. Developing countries face a much larger effect on changes in budget balances following an extreme weather event than do advanced economies. Based on these findings, we discuss implications for fiscal policy and publicly-provided disaster insurance. Our policy conclusions point to the enhanced need to reach and maintain sound fiscal positions given that climate change is expected to cause an increase in the frequency and severity of natural disasters. JEL Classification: Q54, Q58, F59, H87.

Keywords: Global warming; climate change; fiscal sustainability; disasters. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-mac
Date: 2009-05
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