Board of Governors of the Federal Reserve System (via Public) / Natural Disasters, Climate Change, and Sovereign Risk
Introduction Unexpected shocks may tip countries with elevated fiscal vulnerabilities into default. The literature has emphasized the role of macroeconomic and financial shocks, such as a decline of commodity prices (Reinhart et al., 2016) or banking crises (Baltenau and Erce, 2018) in shaping sovereign risk. However, other types of shocks, such as political events or natural disasters, are equally important. 2 Extreme weather events appear especially salient in light of the key role played by natural disasters in recent sovereign default episodes (i.e. Grenada 2004, and Antigua y Barbuda 200...
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