The Macro-Fiscal Aftermath of Weather-Related Disasters: Do Loss Dimensions Matter?
IMF Working Papers, November 8, 2017
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Bibliographic details
- Authors: Kerstin Gerling
- Published: November 8, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484326633.001
Study scope and methodology
- Author: Kerstin Gerling
- Date: November 8, 2017
- Sample: 19 countries in Developing Asia
- Period covered: 1970 to 2015
- Methodology: panel-VARX studies
- Pages: 32
- Series: Working Paper No. 2017/235
- Issue: 235
- DOI: https://doi.org/10.5089/9781484326633.001
- ISBN: 9781484326633
- ISSN: 1018-5941
- Stock No: WPIEA2017235
Key empirical findings
- Output loss after severe weather-related disasters can be permanent.
- Output loss is reported as being twice as large for cases of severe casualties or material damages than for cases measured by people affected.
- Key fiscal aggregates remain surprisingly stable in the aftermath of disasters.
- Event and case studies indicate two possible explanations for fiscal stability:
- Deliberate policy choice to preserve fiscal aggregates.
- Binding constraints that limit fiscal maneuver, prompting alternative responses.
Fiscal responses and mechanisms observed
- Where constraints bind, governments may respond through mitigating fiscal policy efforts such as:
- Ad hoc fiscal rebalancing
- Reprioritization of expenditures
- These responses can reflect trade-offs between maintaining fiscal aggregates and addressing disaster relief and reconstruction needs.
Policy implications and recommendations
- Disaster preparedness and mitigation efforts should be better customized to countries’ risk exposure along specific loss dimensions (e.g., casualties, material damage, people affected).
- Fiscal policy planning should account for:
- The potential for permanent output losses following severe casualties or material damage.
- The likelihood that fiscal aggregates may appear stable due either to deliberate policy or to binding constraints, which has implications for the design of fiscal buffers and contingency financing.
- Consideration of ad hoc fiscal rebalancing and reprioritization mechanisms when designing fiscal frameworks for disaster resilience.
Subject and keywords (as listed)
- Subject: Environment, Fiscal policy, Fiscal stance, Natural disasters, Public debt, Revenue administration
- Keywords: capital expenditure, climate change, Das country, demand management, disaster risk, fiscal policy, fiscal policy response, Fiscal stance, Global, government effectiveness, growth, loss dimension, loss intensity threshold, loss measure, loss threshold, material loss, Natural disasters, private sector, weather-related natural disasters, WP
IMF Working Paper: "The Macro-Fiscal Aftermath of Weather-Related Disasters: Do Loss Dimensions Matter?" by Kerstin Gerling, Working Paper No. 2017/235, November 8, 2017.