On the GDP Effects of Severe Physical Hazards

Martin Bodenstein and Mikaël Scaramucci

No 1386, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We assess the impacts from physical hazards (or severe weather events) on economic activity in a panel of 98 countries using local projection methods. Proxying the strength of an event by the monetary damages it caused, we find severe weather events to reduce the level of GDP. For most events in the EM-DAT data set the effects are small. The largest events in our sample (above the 90th percentile of damages) bring down the level of GDP by 0.5 percent for several years without recovery to trend. Smaller events (below the 90th percentile) see a less immediate decrease in initial years (0.1 percent) that progressively widens to become similar to the effect of larger disasters after 10 years. Climatological hazards (droughts and forest fires) appear to have the largest effects. These findings are robust across country groupings by development and alternative measures of the strength of the physical hazard.

Keywords: Climate-related risk; GDP growth; Natural hazards and disasters; Rare disasters; Vulnerability to climate impacts (search for similar items in EconPapers)
JEL-codes: O50 Q54 (search for similar items in EconPapers)
Date: 2024-02-13
New Economics Papers: this item is included in nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1386

DOI: 10.17016/IFDP.2024.1386

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