Integrating Out Natural Disaster Shocks
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. (JEL E21, E22, E23, F32, F33, F34, Q54)
Fields of Study & Subjects
Disaster Management and Resilience
Flood Risk Assessment and Management
Disaster Response and Management
Publication details
- Journal / source
- American Economic Journal Economic Policy
- Volume
- 18
- Issue
- 2
- Pages
- 78–106
- Publication date
- 29 April 2026
- Language
- EN