THE IMPACT OF NATURAL DISASTERS ON PUBLIC DEBT ACCUMULATION IN SELECTED ECCU COUNTRIES

Author(s): LUGAY, BEVERLY; JAMES, RONALD (2014)

Created 24 Mar, 2014
Categories Working Papers
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This paper investigates whether natural disasters affect the accumulation of public debt in the six independent countries of the Eastern Caribbean Currency Union (ECCU) using panel data regression. The paper argues that the occurrence of natural disasters leads to the accumulation of public debt to finance reconstruction as fiscal resources are often times limited and expenditure structures are too rigid to absorb the effects of external shocks. Using panel data for the period 1993-2011 the results reveal that natural disasters have a significant impact on the growth of public debt in the ECCU. In a year when a natural disaster inflicting 2.0 per cent or more of GDP strikes, the debt to GDP ratio rises by 6.7 per cent, compared with a year when a disaster of lesser intensity or none strikes. JEL

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