Integrating Out Natural Disaster Shocks

Franziska Bremus and Malte Rieth

No 2063, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We study the role of international financial integration in buffering natural disaster shocks, using a large sample of advanced and emerging economies. Conditioning on such exogenous events addresses the endogeneity between financial structures and economic conditions. We document that integration improves shock absorption: output, consumption, and investment are significantly higher after a shock in states of high integration than in states of low integration. However, the benefits of international risk sharing mostly come to advanced economies. Emerging markets only profit from more integration if they have good institutions or high debt assets, whereas higher debt liabilities weaken the recovery.

Keywords: Financial integration; natural disasters; international risk sharing; dynamic panel model; emerging markets (search for similar items in EconPapers)
JEL-codes: E44 F36 F62 G11 G15 Q54 (search for similar items in EconPapers)
Pages: 31 p.
Date: 2023
New Economics Papers: this item is included in nep-env, nep-fdg and nep-opm
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