American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Integrating Out Natural Disaster Shocks
American Economic Journal: Economic Policy
(pp. 78–106)
Abstract
We study the role of international financial integration in buffering natural disaster shocks, using a large sample of advanced and emerging economies. Natural disasters are largely unpredictable and unrelated to the state of financial integration. We document that integration improves the absorption of such shocks: Output, consumption, and investment are significantly higher after a natural disaster in states with high than in states with low integration. The benefits are most clear for advanced economies. Emerging markets tend to profit from financial integration, too, but the estimates are less precise unless we condition on institutional quality or consider only debt assets.Citation
Bremus, Franziska, and Malte Rieth. 2026. "Integrating Out Natural Disaster Shocks." American Economic Journal: Economic Policy 18 (2): 78–106. DOI: 10.1257/pol.20220801Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E22 Investment; Capital; Intangible Capital; Capacity
- E23 Macroeconomics: Production
- F32 Current Account Adjustment; Short-term Capital Movements
- F33 International Monetary Arrangements and Institutions
- F34 International Lending and Debt Problems
- Q54 Climate; Natural Disasters and Their Management; Global Warming