Natural Disasters and Scarring Effects

Weicheng Lian, Jose Ramon Moran and Raadhika Vishvesh

No 2022/253, IMF Working Papers from International Monetary Fund

Abstract: This paper uses a novel empirical approach, following the literature on hysteresis, to explore medium-term scarring of natural disasters for countries vulnerable to climate change. By quantifying the dynamic effects of natural disasters on real GDP per capita for a large number of episodes using a synthetic control approach (SCA) and focusing on severe shocks, we demonstrate that a persistently large deviation of real GDP per capita from the counterfacutal trend exists five years after a severe shock in many countries. The findings highlight the importance and urgency of building ex-ante resilience to avoid scarring effects for countries prone to natural disasters, such as those in the Caribbean region.

Keywords: Natural disasters; scarring effects; synthetic control approach; IMF working papers; scarring effect; ante resilience; medium-term scarring; output effect; Tourism; Climate change; Caribbean; Global; Western Hemisphere (search for similar items in EconPapers)
Pages: 30
Date: 2022-12-16
New Economics Papers: this item is included in nep-env
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