{
  "title": "Monetary Policy in Disaster-Prone Developing Countries",
  "publication": "IMF Working Papers, April 1, 2022",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685",
  "overlayPath": "/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685/index.md",
  "summary": "This paper analyzes monetary policy regimes in emerging and developing economies where climate-related natural disasters are major macroeconomic shocks.",
  "sections": [
    {
      "heading": "Main findings",
      "content": "- The paper analyzes monetary policy regimes in emerging and developing economies where climate-related natural disasters are major macroeconomic shocks.\n- A narrative analysis of IMF reports published around the occurrence of natural disasters documents:\n  - the impact on important macroeconomic variables, and\n  - monetary policy responses.\n- Where countries have at least some degree of monetary policy independence, they typically react by tightening the monetary policy stance.\n- In a sizable number of cases, monetary policy was accommodated.\n- A small open-economy New-Keynesian model with disaster shocks is used to evaluate welfare under alternative monetary policy rules.\n- Model results suggest that:\n  - Responding to inflation to an extent sufficient to keep inflation expectations anchored, while allowing temporary deviations from its target, is the welfare maximizing policy.\n  - Alternative regimes such as strict inflation targeting, exchange rate pegs, or Taylor rules explicitly responding to economic activity or the exchange rate would be welfare-detrimental."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Anchor inflation expectations by responding to inflation sufficiently, while tolerating temporary deviations from the inflation target when disasters occur.\n- Avoid policy regimes that mechanically impose:\n  - strict inflation targeting,\n  - exchange rate pegs, or\n  - Taylor-type rules that explicitly respond to economic activity or the exchange rate,\n  as these are indicated by the model to be welfare-detrimental in the presence of disaster shocks."
    },
    {
      "heading": "Methodology and scope",
      "content": "- Approach:\n  - Narrative analysis of IMF reports around natural disasters to document macroeconomic impacts and policy responses.\n  - Quantitative evaluation using a small open-economy New-Keynesian model with disaster shocks.\n- Geographic and thematic focus:\n  - Emerging and developing economies experiencing climate-related natural disasters.\n  - Topics include Conventional peg, Environment, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Monetary policy frameworks, Natural disasters, Prices.\n- Keywords used in the paper: analysis documentation, Caribbean, cases monetary policy, Climate Change, Conventional peg, DSGE, Exchange Rate Regimes., Inflation, Inflation targeting, inflation volatility, Monetary Policy, Monetary policy frameworks, monetary policy response, monetary policy stance, Natural disasters, Natural Disasters.\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/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685/bundle-manifest.json)",
    "Authors: Alessandro Cantelmo, Nikos Fatouros, Giovanni Melina, Chris Papageorgiou",
    "Published: April 1, 2022",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400204371.001",
    "The paper analyzes monetary policy regimes in emerging and developing economies where climate-related natural disasters are major macroeconomic shocks.",
    "A narrative analysis of IMF reports published around the occurrence of natural disasters documents:",
    "Where countries have at least some degree of monetary policy independence, they typically react by tightening the monetary policy stance.",
    "In a sizable number of cases, monetary policy was accommodated.",
    "A small open-economy New-Keynesian model with disaster shocks is used to evaluate welfare under alternative monetary policy rules.",
    "Model results suggest that:",
    "Anchor inflation expectations by responding to inflation sufficiently, while tolerating temporary deviations from the inflation target when disasters occur.",
    "Avoid policy regimes that mechanically impose:",
    "Approach:",
    "Geographic and thematic focus:",
    "Keywords used in the paper: analysis documentation, Caribbean, cases monetary policy, Climate Change, Conventional peg, DSGE, Exchange Rate Regimes., Inflation, Inflation targeting, inflation volatility, Monetary Policy, Monetary policy frameworks, monetary policy response, monetary policy stance, Natural disasters, Natural Disasters.",
    "**Working Paper**"
  ],
  "related": [
    {
      "title": "Working Paper",
      "role": "paper",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2022/english/wpiea2022067-print-pdf.pdf",
      "summary": {
        "path": "/-/media/files/publications/wp/2022/english/wpiea2022067-print-pdf.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/wp/2022/english/wpiea2022067-print-pdf.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685/index.md",
    "json": "/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685/index.json",
    "bundleManifest": "/en/publications/wp/issues/2022/04/01/monetary-policy-in-disaster-prone-developing-countries-515685/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-16T20:56:10.991Z"
}