Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans?
Pauline Avril (),
Gregory Levieuge () and
Camelia Romocea Turcu
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Pauline Avril: UniversitÃ© d'OrlÃ©ans
Gregory Levieuge: Banque de France, UniversitÃ© d'OrlÃ©ans
No 2021.13, Working Papers from International Network for Economic Research - INFER
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 drops (rises) when macroprudential regulation is stringent (lax). 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, the predictability of which may prompt self-discipline.
Keywords: Financial stress; External finance premium; Macroprudential policy; Natural disasters; Local projections. (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
Pages: 48 pages
New Economics Papers: this item is included in nep-cba, nep-env, nep-fdg and nep-mac
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Working Paper: Natural Disasters and Financial Stress: Can Macroprudential Regulation Tame Green Swans? (2022)
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:inf:wpaper:2021.13
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