Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/247581 
Year of Publication: 
2020
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Volume:] 8 [Issue:] 3 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-27
Publisher: 
MDPI, Basel
Abstract: 
Recent research in financial economics has shown that rare large disasters have the potential to disrupt financial sectors via the destruction of capital stocks and jumps in risk premia. These disruptions often entail negative feedback effects on the macroeconomy. Research on disaster risks has also actively been pursued in the macroeconomic models of climate change. Our paper uses insights from the former work to study disaster risks in the macroeconomics of climate change and to spell out policy needs. Empirically, the link between carbon dioxide emission and the frequency of climate related disaster is investigated using a panel data approach. The modeling part then uses a multi-phase dynamic macro model to explore the effects of rare large disasters resulting in capital losses and rising risk premia. Our proposed multi-phase dynamic model, incorporating climate-related disaster shocks and their aftermath as a distressed phase, is suitable for studying mitigation and adaptation policies as well as recovery policies.
Subjects: 
climate economics
disaster risk
macro feedback
multi-phase macro model
monetary and financial policies
environmental economics
JEL: 
C61
Q54
Q58
H5
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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