Natural Disasters and Scarring Effects
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Summary:
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.
Series:
Working Paper No. 2022/253
Frequency:
regular
English
Publication Date:
December 16, 2022
ISBN/ISSN:
9798400227172/1018-5941
Stock No:
WPIEA2022253
Pages:
30
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