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Working Paper
Climate Defaults and Financial Adaptation
We analyze the relationship between climate-related disasters and sovereign debt crises using a model with capital accumulation, sovereign default, and disaster risk. We find that disaster risk and default risk together lead to slow post-disaster recovery and heightened borrowing costs. Calibrating the model to Mexico, we find that the increase in cyclone risk due to climate change leads to a welfare loss equivalent to a permanent 1% consumption drop. However, financial adaptation via catastrophe bonds and disaster insurance can reduce these losses by about 25%. Our study highlights the ...
Discussion Paper
The Path of Economic Recovery from Superstorm Sandy
Superstorm Sandy caused damage and disruption to a wide swath of the New York-New Jersey region. The high winds and storm surge resulted in significant physical damage to residential property, commercial real estate, and the power and transportation infrastructure. Everyday activities such as commuting, shopping, and traveling were impeded or in some cases prevented. As a number of communities across the region continue to cope with the damage and ongoing disruptions, there’s concern about if and when activity will return to normal.
Financial Hardship Following Hurricane Harvey
Financial constraints before the hurricane, homeownership status and the likelihood of having flood insurance altered the financial effects of flooding on families.