Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316932 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11818
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper examines the impact of natural disasters on fiscal and external sustainability across 134 economies from 1980 to 2023. We adopt a two-step approach: first, we estimate country-specific, time-varying sustainability coefficients; second, we assess their determinants using Weighted Least Squares panel regressions with fixed effects. To complement the long-run analysis, we employ local projections to capture the short-term dynamics following disaster-related mortality, vulnerability, and resilience shocks. Results show that natural disasters weaken fiscal sustainability, particularly in emerging and vulnerable economies. Vulnerability exacerbates fiscal and external fragility, while resilience mitigates adverse effects on public accounts. Local projections reveal that fiscal sustainability deteriorates significantly in the medium term after disaster shocks, whereas external sustainability responses are more muted and heterogeneous. Together, these findings highlight the importance of combining long- and short-run approaches to understand how climate shocks propagate through macroeconomic channels and to inform adaptive, risk-sensitive fiscal policy frameworks.
Subjects: 
fiscal sustainability
external sustainability
climate risk
natural disasters
local projections
weighted least squares.
JEL: 
E62
F32
H63
O23
Q54
C33
Document Type: 
Working Paper
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