Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans?

Avril Pauline, Grégory Levieuge and Turcu Camelia
Authors registered in the RePEc Author Service: Camelia ROMOCEA TURCU

Working papers from Banque de France

Abstract: We empirically investigate the impact of natural disasters on the external finance premium (EFP), conditional on the stringency of macroprudential regulation. The intensity of natural disasters is measured through an original set of geophysical indicators for a sample of 88 countries over the period 1996-2016. Using local projections, we show that, following storms, the EFP significantly rises (drops) when macroprudential regulation is lax (stringent). This suggests that regulated financial systems could foster favorable financing conditions to replace destroyed capital with more productive capital. Macroprudential stringency seems less crucial in the case of floods, which are more predictable and thus may prompt self-discipline.

Keywords: Financial Stress; External Finance Premium; Macroprudential Policy; Natural Disasters; Local Projections (search for similar items in EconPapers)
JEL-codes: C23 E43 E5 Q54 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dem, nep-env and nep-mac
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans? (2021)
Working Paper: Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:874

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