Title

Impact of hurricanes strikes on international reserves in the Caribbean

Date of Publication

1-1-2020 12:00 AM

Publication Date

February 5, 2020

Security Theme

Extreme Events

Keywords

Natural disasters, international reserves, foreign aid, remittances, panel VARX, low-income, high-income, Caribbean countries

Description

In this study, the impacts of hurricane shocks on the international reserves of Caribbean countries is investigated. To this end, we use a panel VARX (Vector Auto-Regressive, with exogenous variables) with monthly data that allow us to account for external shocks (hurricane strikes). Our results show that for the whole sample, an increase in foreign reserves a month after the strike was followed by a decrease 2 months later. The increase can be explained by remittances and emergency foreign aid granted by the International Monetary Fund. Dividing the sample into middle-income and high-income countries shows that the increase is mainly due to the latter. This outcome may not be surprising given that production in Caribbean high-income countries is mainly due to manufacturing, off-shore banking and natural resources exploitation, which are all non-weather dependent sectors, while the middle-income countries are mostly dependent on weather-prone agriculture and tourism.

Share

Report Location

 
COinS
 
Jan 1st, 12:00 AM

Impact of hurricanes strikes on international reserves in the Caribbean

In this study, the impacts of hurricane shocks on the international reserves of Caribbean countries is investigated. To this end, we use a panel VARX (Vector Auto-Regressive, with exogenous variables) with monthly data that allow us to account for external shocks (hurricane strikes). Our results show that for the whole sample, an increase in foreign reserves a month after the strike was followed by a decrease 2 months later. The increase can be explained by remittances and emergency foreign aid granted by the International Monetary Fund. Dividing the sample into middle-income and high-income countries shows that the increase is mainly due to the latter. This outcome may not be surprising given that production in Caribbean high-income countries is mainly due to manufacturing, off-shore banking and natural resources exploitation, which are all non-weather dependent sectors, while the middle-income countries are mostly dependent on weather-prone agriculture and tourism.