The shocks of natural hazards on financial systems

Xia Chen and Chun-Ping Chang ()
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Xia Chen: School of Economics and Management, Changsha University of Science and Technology
Chun-Ping Chang: Shih Chien University

Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, 2021, vol. 105, issue 3, No 1, 2327-2359

Abstract: Abstract Using panel data consisting of 116 countries, this research investigates the effects of natural hazards on financial systems, including banking system, insurance system, and stock markets. Considering the moderating effects of financial risk, we introduce the interaction between natural hazards and financial risk and also analyze the heterogeneity of income level. Our main conclusions are as follows. (1) Though natural hazards do not significantly influence the banking system directly, they do impact the banking system through financial risk. The moderating effects of natural hazards on the banking system through financial risk are significantly negative. (2) The impacts of natural hazards on the insurance system are dynamic and last over a long period, while the moderating effects of natural hazards through financial risk are significantly negative. (3) The effects of natural hazards on the stock markets and the moderating effects through financial risk are significantly negative. (4) The negative effects of natural hazards on the financial system through financial risk are higher in low-income countries than those in high-income countries. From these results, we offer policy implications such as establishing a complete economic system and lowering the financial risk.

Keywords: Natural hazards; Financial system; Moderating effects; Fixed effects model (search for similar items in EconPapers)
JEL-codes: F30 Q54 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11069-020-04402-0

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