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

Stefan Mittnik, Willi Semmler and Alexander Haider
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Alexander Haider: New School for Social Research, New York, NY 10011, USA

Econometrics, 2020, vol. 8, issue 3, 1-27

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 effects on the macroeconomy. 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 related disaster is investigated using a panel data approach. The modeling part then uses a multi-phase dynamic macro model to explore the effects 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 a distressed phase, is suitable for studying mitigation and adaptation policies as well as recovery policies.

Keywords: climate economics; disaster risk; macro feedback; multi-phase macro model; monetary and financial policies; environmental economics (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:8:y:2020:i:3:p:33-:d:400531

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