{
  "title": "Earthquakes and Emerging Market Sovereign Bond Spreads",
  "publication": "IMF Working Papers, October 24, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2025/10/24/earthquakes-and-emerging-market-sovereign-bond-spreads-570554",
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  "summary": "We study how sovereign bond markets respond to earthquakes in emerging markets, using data from 96 countries between 2012 and 2023. While earthquakes raise spreads on average, the effect depends critically on state capacity.",
  "sections": [
    {
      "heading": "Key findings",
      "content": "- Study period and sample: data from 96 countries between 2012 and 2023.\n- Average effect: earthquakes raise sovereign bond spreads on average.\n- Heterogeneity by state capacity:\n  - In low-capacity countries, spreads rise sharply and persist.\n  - In high-capacity states, spreads remain stable or fall.\n- Timing and persistence:\n  - These effects appear immediately and last several months.\n- Robustness:\n  - Results are robust to multiple controls and placebo tests.\n- Interpretation:\n  - Markets interpret disasters not simply as economic shocks but as institutional stress tests, penalizing fragile states.\n  - Institutional quality functions as disaster insurance."
    },
    {
      "heading": "Data and methodology (as described)",
      "content": "- Empirical focus: sovereign bond market responses to earthquakes in emerging markets.\n- Temporal coverage: 2012–2023.\n- Cross-country sample size: 96 countries.\n- Outcomes examined: sovereign bond spreads and their evolution following earthquake events.\n- Controls and validation: multiple controls and placebo tests applied to assess robustness."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Institutional quality and state capacity materially alter market reactions to natural disasters.\n- Strengthening state capacity and institutional quality can mitigate adverse sovereign bond market outcomes following earthquakes.\n- Markets price institutional fragility as part of disaster risk assessment, implying a role for policy reforms that enhance resilience and signaling.\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/2025/10/24/earthquakes-and-emerging-market-sovereign-bond-spreads-570554"
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    "Authors: Rabah Arezki, Patrick A. Imam, Kangni R Kpodar, Dao Le-Van",
    "Published: October 24, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229025645.001",
    "Study period and sample: data from 96 countries between 2012 and 2023.",
    "Average effect: earthquakes raise sovereign bond spreads on average.",
    "Heterogeneity by state capacity:",
    "Timing and persistence:",
    "Robustness:",
    "Interpretation:",
    "Empirical focus: sovereign bond market responses to earthquakes in emerging markets.",
    "Temporal coverage: 2012–2023.",
    "Cross-country sample size: 96 countries.",
    "Outcomes examined: sovereign bond spreads and their evolution following earthquake events.",
    "Controls and validation: multiple controls and placebo tests applied to assess robustness.",
    "Institutional quality and state capacity materially alter market reactions to natural disasters.",
    "Strengthening state capacity and institutional quality can mitigate adverse sovereign bond market outcomes following earthquakes.",
    "Markets price institutional fragility as part of disaster risk assessment, implying a role for policy reforms that enhance resilience and signaling.",
    "**Working Paper**"
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