Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model
IMF Working Papers, July 11, 2019
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- Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model
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Bibliographic details
- Authors: Stefan Mittnik, Willi Semmler, Alexander Haider
- Published: July 11, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498320849.001
Authors and publication
- By Stefan Mittnik, Willi Semmler, Alexander Haider
- July 11, 2019
- IMF Working Papers, Working Paper No. 2019/145
- Pages: 47
- Volume: 2019
- Issue: 145
- DOI: https://doi.org/10.5089/9781498320849.001
- Stock No: WPIEA2019145
- ISBN: 9781498320849
- ISSN: 1018-5941
Central thesis
- Rare large disasters can disrupt financial sectors through destruction of capital stocks and jumps in risk premia, producing negative feedback effects on the macroeconomy.
- Insights from financial-economics research on disaster risks are applied to macroeconomic models of climate change to analyze the causal nexus between emissions, disaster frequency, and macro-financial outcomes.
- A multi-phase dynamic macro model is proposed that treats climate-related disaster shocks and their aftermath as one phase, making it suitable for studying mitigation and adaptation policies.
Empirical findings
- The paper investigates the link between carbon dioxide emission and the frequency of climate-related disaster using cross-sectional and panel data.
- Empirical analysis focuses on the relationship between greenhouse gas emissions and natural disaster frequency, seeking to establish causality consistent with macroeconomic and financial channels.
Modeling approach
- Proposes a multi-phase dynamic macro model incorporating climate-related disaster shocks and their aftermath as one phase.
- The model explicitly includes:
- climate-related disaster shocks,
- capital losses resulting from such disasters,
- rising risk premia following disasters,
- macro-financial feedback mechanisms.
- The modeling framework is intended to explore mitigation and adaptation policy options within a unified dynamic setting.
Policy implications and suitability
- The proposed multi-phase dynamic model is suitable for studying:
- mitigation policies,
- adaptation policies,
- interactions between disaster shocks, capital stock destruction, and financial sector disruptions.
- The paper aims to spell out policy needs arising from the macro-financial effects of climate-related disaster risks.
Subject areas and keywords (as listed)
- Subject: Bonds, Climate change, Climate policy, Environment, Financial institutions, Greenhouse gas emissions, Natural disasters, Stocks
- Keywords: bond financing, bond issuing, Bonds, capital stock, Central Asia, climate bond, Climate change, climate economics, climate finance policy, Climate policy, credit policy, disaster risk, East Asia, environmental economics, Greenhouse gas emissions, low income, macro feedbacks, Middle East, monetary and financial policies, monetary policy, multi-phase macro model, Natural disasters, North Africa, risk pooling, Sub-Saharan Africa, WP
Source: IMF Working Paper “Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model” (Stefan Mittnik, Willi Semmler, Alexander Haider), July 11, 2019; Working Paper No. 2019/145, Pages: 47, DOI: https://doi.org/10.5089/9781498320849.001.
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