Impact of hurricanes strikes on international reserves in the Caribbean

Impact des ouragans sur les réserves de change des pays caraibéins

Eric Strobl, Bazoumana Ouattara and Sandrine Akassi Kablan
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Eric Strobl: UNIBE - Universität Bern = University of Bern = Université de Berne
Sandrine Akassi Kablan: ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel

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Abstract: In this study, we investigate the impacts of hurricane shocks on the international reserves of Caribbean countries. To this end, we use a panel VARX (Vector Auto-Regressive, with exogenous variables) with monthly data that allow us to account for external shocks (hurricane strikes). Our results show that for the whole sample, an increase in foreign reserves a month after the strike was followed by a decrease 2 months later. The increase can be explained by remittances and emergency foreign aid granted by the International Monetary Fund. Dividing the sample into middle-income and high-income countries shows that the increase is mainly due to the latter. This outcome may not be surprising given that production in Caribbean high-income countries is mainly due to manufacturing, off-shore banking and natural resources exploitation, which are all non-weather dependent sectors, while the middle-income countries are mostly dependent on weather-prone agriculture and tourism.

Keywords: Natural disasters; International reserves; Foreign aid; Remittances; Panel VARX (search for similar items in EconPapers)
Date: 2020-08-14
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Citations: View citations in EconPapers (1)

Published in Applied Economics, 2020, 52 (38), pp.4175-4185. ⟨10.1080/00036846.2020.1731411⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04280445

DOI: 10.1080/00036846.2020.1731411

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