Debt, Growth and Natural Disasters A Caribbean Trilogy

July 16, 2014

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Sebastian Acevedo Mejia. Debt, Growth and Natural Disasters A Caribbean Trilogy, (USA: International Monetary Fund, 2014) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper seeks to determine the effects that natural disasters have on per capita GDP and on the debt to GDP ratio in the Caribbean. Two types of natural disasters are studied –storms and floods– given their prevalence in the region, while considering the effects of both moderate and severe disasters. I use a vector autoregressive model with exogenous natural disasters shocks, in a panel of 12 Caribbean countries over a period of 40 years. The results show that both storms and floods have a negative effect on growth, and that debt increases with floods but not with storms. However, in a subsample I find that storms significantly increase debt in the short and long run. I also find weak evidence that debt relief contributes to ease the negative effects of storms on debt.

Subject: Aid flows, Asset and liability management, Debt relief, Debt restructuring, Environment, Foreign aid, Natural disasters

Keywords: Aid flows, Caribbean, Critical value, Cumulative effect, Debt, Debt forgiveness, Debt relief, Debt relief dummy, Debt restructuring, Debt result, Effect coefficient, Effects of flood, Estimation result, Growth, Growth rate, Inflation rate, Likelihood ratio test, Natural disasters, Opportunity cost, Panel VAR with exogenous variables, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/125
Stock No:

WPIEA2014125
ISBN:

9781498337601
ISSN:

1018-5941

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