Frequency of Shocks, Resilience and Shock Persistence: Evidence from Natural Disasters

Omar Bashar () and Debdulal Mallick

MPRA Paper from University Library of Munich, Germany

Abstract: Volatility persistence has important welfare consequences. In this paper, we investigate the effect on volatility persistence of the frequency of shocks for which we consider exogenous natural disasters. We find that, on average, volatility persistence is about 5 percent lower in countries that have experienced one more natural disasters per year. However, there is a non-linearity in that volatility persistence initially decreases and then increases with the frequency of natural disasters. The results are explained in terms of disaster resilience—countries that experience natural disasters frequently develop resilience that shields the economy from the destruction of natural disasters and/or expedites economic recovery. Among the factors that potentially create resilience, we find significance of its structural component.

Keywords: Shock; Natural disaster; Resilience; Volatility persistence (search for similar items in EconPapers)
JEL-codes: E32 H54 I38 Q54 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-cwa, nep-env and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:107517

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