Coping with adversity: The macroeconomic management of natural disasters.

Journal article

Although the scientific evidence on whether natural disasters are becoming more frequent and more violent remains disputed, there is much less disagreement that the economic damage they inflict, in terms of the lost output and the forced migration this promotes, is large and rising. Using macroeconomic policy measures to mitigate these costs is therefore an increasingly important task in disasters-prone economies. The fundamental objective of post-disaster macroeconomic policy is to set key policy levers to return the economy to its pre-disaster path as quickly as possible without generating undue distortions elsewhere in the economy. We do not yet have a comprehensive and robust evaluation of the efficacy of macroeconomic policy responses to extreme events around the world. In the absence of such evidence, this paper draws on basic principles of macroeconomic management and evidence of best-practice experiences from the management of 'conventional' trade shocks, to outline key elements of a normative framework for the efficient macroeconomic response to devastating natural disasters. Given the relative scale of extreme events to the size of their economies and given their underlying vulnerability, these lessons are primarily of relevance to low-income countries.

Authors: Adam, C

• Publisher: Elsevier
• Journal: Environmental Science and Policy
• Publication date: 2012-01-01
• DOI: 10.1016/j.envsci.2012.04.007
• ISSN: 1462-9011
• Language: English