Working Paper: CEPR ID: DP17655
Authors: Fabio Canova; Evi Pappa
Abstract: We examine the dynamic effects of natural disasters in US states and relate them to fiscal policy. Not all disasters are equally costly: only those impacting energy usage have negative output, income and unemployment consequences. Energy responses correlate with the quality of power infrastructures, the share of home ownership, and public insurance policies.The strictness of the budget rules or the presence of budget stabilization funds are irrelevant to determine the depth of the recession. Counter cyclical fiscal policy reduces the severity of the real downfall. Federal aid is crucial in reducing the negative consequences of disasters.
Keywords: Natural Disasters; Energy Consumption; Recessions; Fiscal Policy; Debt Accumulation
JEL Codes: C32; E27; E32; H30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| state fiscal frameworks (H79) | economic outcomes (F61) |
| Natural disasters (H84) | energy consumption (Q41) |
| energy consumption (Q41) | output (C67) |
| energy consumption (Q41) | personal income (D31) |
| Natural disasters (H84) | unemployment rates (J64) |
| federal aid (H77) | economic recovery (E65) |
| federal aid (H77) | output (C67) |
| federal aid (H77) | personal income (D31) |