## Earthquakes and Emerging Market Sovereign Bond Spreads

_IMF Working Papers, October 24, 2025_

## Source details

**Canonical URL:** [Earthquakes and Emerging Market Sovereign Bond Spreads](https://www.imf.org/en/publications/wp/issues/2025/10/24/earthquakes-and-emerging-market-sovereign-bond-spreads-570554)

## Other formats

- [Markdown version](/en/publications/wp/issues/2025/10/24/earthquakes-and-emerging-market-sovereign-bond-spreads-570554/index.md)
- [Structured JSON version](/en/publications/wp/issues/2025/10/24/earthquakes-and-emerging-market-sovereign-bond-spreads-570554/index.json)
- [Bundle manifest](/en/publications/wp/issues/2025/10/24/earthquakes-and-emerging-market-sovereign-bond-spreads-570554/bundle-manifest.json)

## Bibliographic details
- 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

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### Key findings
- 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:
  - In low-capacity countries, spreads rise sharply and persist.
  - In high-capacity states, spreads remain stable or fall.
- Timing and persistence:
  - These effects appear immediately and last several months.
- Robustness:
  - Results are robust to multiple controls and placebo tests.
- Interpretation:
  - Markets interpret disasters not simply as economic shocks but as institutional stress tests, penalizing fragile states.
  - Institutional quality functions as disaster insurance.

### Data and methodology (as described)
- 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.

### Policy implications and interpretation
- 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.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2025/10/24/earthquakes-and-emerging-market-sovereign-bond-spreads-570554_