Abstract
This study explores if natural disasters are able to trigger a sovereign debt default. Natural disasters make the debt of a country less sustainable as they worsen the public finances of a country. The main findings from our empirical analysis clearly indicate that large-scale natural disasters increase significantly the onset probability of a sovereign debt default by about three percentage-points. It turns out that particularly major earthquakes and storms raise the likelihood of a default as they create the most widespread damage reported worldwide. This will limit the debt servicing opportunities of a country in the future.
Original language | English |
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Pages (from-to) | 93-103 |
Journal | Journal of International Money and Finance |
Volume | 73 |
Issue number | Part A |
DOIs | |
Publication status | Published - 1 May 2017 |
Keywords
- Government debt
- Natural disasters
- Sovereign default