Jasmin Groeschl (ifo Institut - Leibniz-Institut fuer Wirtschaftsforschung an der Universitaet Muenchen e.V.): Transient Effects of Natural Hazards on International Trade Flows: Evidence from Monthly Data
Natural hazards affect international trade through a disruption of transportation networks (i.e. ports or infrastructure) or through a transitory shock on production, consumption, and investment. In this paper, we focus on the very short run effects of natural hazards on international trade applying monthly data in a two-step approach. We first estimate time-varying exporter and importer fixed effects in a gravity framework. In the second stage, we find that natural hazards weighted by the affected population reduce exports in the very short run due to a shock on output, while the effect on imports related to expenditure shocks depends on the types of natural hazards (positive for geological and negative for some climatological hazards). Heterogeneity exists not only with respect to disaster types, but also for country income groups. Depending on the disaster type, the post-hazard shock from output disruption persists, while the expenditure shock fades more quickly and can even turn positive. Access to finance in the aftermath of a natural hazards matters mostly for low income countries.