{
  "title": "Macroeconomic Outcomes in Disaster-Prone Countries",
  "publication": "IMF Working Papers, October 11, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/10/11/macroeconomic-outcomes-in-disaster-prone-countries-48704",
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  "summary": "Using a dynamic stochastic general equilibrium model, we study the channels through which natural disaster shocks affect macroeconomic outcomes and welfare in disaster-prone countries.",
  "sections": [
    {
      "heading": "Methodology",
      "content": "- Model: Dynamic stochastic general equilibrium (DSGE) model.\n- Solution method: Taylor projection, a solution method shown to deal effectively with high-impact weather shocks calibrated in accordance to empirical evidence.\n- Focus: Channels through which natural disaster shocks affect macroeconomic outcomes and welfare in disaster-prone countries."
    },
    {
      "heading": "Key findings",
      "content": "- Weather shocks have large and persistent effects that significantly impact the income convergence path of disaster-prone countries.\n- Relative to non-disaster-prone countries, on average, these shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.6 percent.\n- Welfare gains to countries that self-finance investments in resilient public infrastructure are found to be negligible.\n- International aid has to be sizable to achieve significant welfare gains.\n- It is more cost-effective for donors to contribute to the financing of resilience before the realization of disasters, rather than disbursing aid after their realization."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Prioritize donor financing of resilience-building measures before disasters occur, as this is more cost-effective than post-disaster aid disbursements.\n- Recognize that self-financing of resilient public infrastructure by disaster-prone countries yields negligible welfare gains; international assistance needs to be sizable to meaningfully improve welfare outcomes.\n- Incorporate high-impact weather shock calibration into macroeconomic assessments and policy planning for disaster-prone countries, using solution methods (such as Taylor projection) capable of handling such shocks."
    },
    {
      "heading": "Additional notes",
      "content": "- Authors: Alessandro Cantelmo, Giovanni Melina, Chris Papageorgiou.\n- Publication: IMF Working Papers, Issue 2019/217, Pages: 52.\n- DOI: https://doi.org/10.5089/9781513515380.001\n\nAlessandro Cantelmo, Giovanni Melina, and Chris Papageorgiou. \"Macroeconomic Outcomes in Disaster-Prone Countries\", IMF Working Papers 2019, 217 (2019), accessed 9/18/2026, https://doi.org/10.5089/9781513515380.001\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/10/11/macroeconomic-outcomes-in-disaster-prone-countries-48704"
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    "Authors: Alessandro Cantelmo, Giovanni Melina, Chris Papageorgiou",
    "Published: October 11, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513515380.001",
    "Model: Dynamic stochastic general equilibrium (DSGE) model.",
    "Solution method: Taylor projection, a solution method shown to deal effectively with high-impact weather shocks calibrated in accordance to empirical evidence.",
    "Focus: Channels through which natural disaster shocks affect macroeconomic outcomes and welfare in disaster-prone countries.",
    "Weather shocks have large and persistent effects that significantly impact the income convergence path of disaster-prone countries.",
    "Relative to non-disaster-prone countries, on average, these shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.6 percent.",
    "Welfare gains to countries that self-finance investments in resilient public infrastructure are found to be negligible.",
    "International aid has to be sizable to achieve significant welfare gains.",
    "It is more cost-effective for donors to contribute to the financing of resilience before the realization of disasters, rather than disbursing aid after their realization.",
    "Prioritize donor financing of resilience-building measures before disasters occur, as this is more cost-effective than post-disaster aid disbursements.",
    "Recognize that self-financing of resilient public infrastructure by disaster-prone countries yields negligible welfare gains; international assistance needs to be sizable to meaningfully improve welfare outcomes.",
    "Incorporate high-impact weather shock calibration into macroeconomic assessments and policy planning for disaster-prone countries, using solution methods (such as Taylor projection) capable of handling such shocks.",
    "Authors: Alessandro Cantelmo, Giovanni Melina, Chris Papageorgiou.",
    "Publication: IMF Working Papers, Issue 2019/217, Pages: 52.",
    "DOI: https://doi.org/10.5089/9781513515380.001",
    "**Working Paper**"
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