THE GROWTH AFTERMATH OF NATURAL DISASTERS
Article first published online: 28 OCT 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 28, Issue 3, pages 412–434, April/May 2013
How to Cite
Fomby, T., Ikeda, Y. and Loayza, N. V. (2013), THE GROWTH AFTERMATH OF NATURAL DISASTERS. J. Appl. Econ., 28: 412–434. doi: 10.1002/jae.1273
- Issue published online: 26 MAR 2013
- Article first published online: 28 OCT 2011
- Manuscript Revised: 17 JUL 2011
- Manuscript Received: 3 AUG 2009
This paper traces the yearly response of gross domestic product growth—both aggregated and disaggregated into its agricultural and non-agricultural components—to four types of natural disasters: droughts, floods, earthquakes, and storms. The paper uses a methodological approach based on pooling the experiences of various countries over time. It consists of vector autoregressions in the presence of endogenous variables and exogenous shocks (VARX), applied to a panel of cross-country and time series data. The analysis finds heterogeneous effects on a variety of dimensions. First, the effects of natural disasters are stronger on developing than on advanced countries. Second, not all natural disasters are alike in terms of the growth response they induce, and some can even have positive effects on economic growth. Third, severe disasters often carry much worse effects than moderate effects do. Fourth, the timing of the growth response varies with both the type of natural disaster and the sector of economic activity. Copyright © 2011 John Wiley & Sons, Ltd.