Flooded with debt

Jeroen Klomp

Journal of International Money and Finance, 2017, vol. 73, issue PA, 93-103

Abstract: This study explores if natural disasters are able to trigger a sovereign debt default. Natural disasters make the debt of a country less sustainable as they worsen the public finances of a country. The main findings from our empirical analysis clearly indicate that large-scale natural disasters increase significantly the onset probability of a sovereign debt default by about three percentage-points. It turns out that particularly major earthquakes and storms raise the likelihood of a default as they create the most widespread damage reported worldwide. This will limit the debt servicing opportunities of a country in the future.

Keywords: Government debt; Sovereign default; Natural disasters (search for similar items in EconPapers)
JEL-codes: E6 F34 H6 Q54 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:73:y:2017:i:pa:p:93-103

DOI: 10.1016/j.jimonfin.2017.01.006

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