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Using a dynamic stochastic general equilibrium model, we study the channels through which natural disaster shocks affect macroeconomic outcomes and welfare in disaster-prone countries. We solve the model using Taylor projection, a solution method that is shown to deal effectively with high-impact weather shocks calibrated in accordance to empirical evidence. We find large and persistent effects of weather shocks that significantly impact the income convergence path of disaster-prone countries. Relative to non-disaster-prone countries, on average, these shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.6 percent. Welfare gains to countries that self-finance investments in resilient public infrastructure are found to be negligible, and international aid has to be sizable to achieve significant welfare gains. In addition, it is more cost-effective for donors to contribute to the financing of resilience before the realization of disasters, rather than disbursing aid after their realization.

Hazardous geographic environments. --- Macroeconomics. --- Economics --- Environments, Hazardous geographic --- Disasters --- Human ecology --- Investments: General --- Macroeconomics --- Public Finance --- Environmental Economics --- Natural Disasters --- Fiscal Policy --- Foreign Aid --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Debt --- Debt Management --- Sovereign Debt --- Fiscal and Monetary Policy in Development --- Climate --- Natural Disasters and Their Management --- Global Warming --- Macroeconomics: Consumption --- Saving --- Wealth --- Investment --- Capital --- Intangible Capital --- Capacity --- Natural disasters --- Public finance & taxation --- Climate change --- Public debt --- Consumption --- Private investment --- Environment --- National accounts --- Debts, Public --- Climatic changes --- Saving and investment --- United States

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Quality Upgrading and Export Performance in the Asian Growth Miracle.

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Many countries are experiencing persistent, weak medium-term growth and limited fiscal space. Against this background, economic policy agendas—in both advanced and developing economies—are focusing increasingly on structural reforms. While there is broad agreement on the economic benefits of structural reforms, the political-economy of reform is less settled. This is because reforms may generate gains only in the longer term while distributional effects may be sizable in the short run, and because governments may lack political capital to confront vocal interest groups. In these circumstances, politicians may hold back on reforms, fearing they will be penalized at the ballot box. The aim of this Staff Discussion Note is to examine whether the fear of a political cost associated with structural reforms is justified by the available evidence, and whether there are lessons from the data about how reform strategies might be designed to mitigate potential political costs. It provides a major addition to recent IMF analysis examining the output and employment effect of reforms.

Aggregate Productivity --- Balance of payments --- Capital account --- Cross-Country Output Convergence --- Current Account Adjustment --- Current account --- Economics of Regulation --- Exports and Imports --- Finance: General --- Financial regulation and supervision --- Financial sector reform --- Financial services industry --- Financial services law & regulation --- Fiscal consolidation --- Fiscal Policy --- Fiscal policy --- General Financial Markets: Government Policy and Regulation --- Institutions and Growth --- Institutions and the Macroeconomy --- International economics --- Legal Monopolies and Regulation or Deregulation --- Macroeconomics --- Macrostructural analysis --- Measurement of Economic Growth --- Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior --- Plant Closings --- Political Economy --- Severance Pay --- Short-term Capital Movements --- Structural reforms --- Unemployment Insurance --- Spain