The impacts of disasters on capital flows, international reserves and exchange rates: implications for public sector financial risk management and development lenders
Key information
- Date
- Time
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1:00 pm to 2:00 pm
- Venue
- Online
- Event type
- Webinar
About this event
This event is part of the RAMP University Network Seminar Series.
This study investigates empirically the effect of disasters on capital flows, international reserves and exchange rates, and discusses implications for risk management and potential mitigation strategies. We define major disaster quarters as quarterly impacts exceeding 1% losses as percent of GDP or 1% of total population affected.
We find that for developing countries eligible to borrow from the World Bank Group’s International Development Association (IDA), a major disaster causes a statistically significant decline in net investment flows (portfolio and other) over three quarters and a depreciation of the real effective exchange rate. When observing nominal exchange rates for the entire sample of emerging and developing economies, an initial currency appreciation effect is offset by depreciation in the periods after in the majority of cases: a year after the disaster almost 3 out of 5 countries see their currency depreciating. Our panel dataset combines disaster losses between 2005 and 2021 with foreign exchange, economic and financial flow data for up to 66 countries. Our results provide new colour to policy makers and aid organisations attempting to deal with the increasing severity and frequency of disasters.
The documented vulnerabilities of IDA countries support recent policy reform calls. These include a medium to long-term agenda to strengthen domestic savings and funding markets, more immediate efforts to strengthen the currency and interest rate risk management capacities of IDA recipient debt management offices, and a strong mandate for providers of international development finance to assist IDA borrowers to reduce currency mismatches by offering loans indexed to the local exchange rate and supporting the creation of currency risk markets.
Header image credit: Piyush Priyank via Unsplash.
About the Speakers
Yuen Lo is a Lecturer in Economics at London Metropolitan University. He is also a Senior Fellow at the Centre for Sustainable Finance at SOAS, University of London. He completed his PhD on blockchain economics at UCL in 2023, and has published articles on Bitcoin mining, ICO tokens and decentralised exchanges. He has worked on a UN Environment grant focused on climate vulnerability and its impact on cost of debt, and on an EU Horizon 2020 grant on circular business models for cultural heritage. His extensive time in industry includes ten years in investment management for a FTSE 100 pension fund, two years at an enterprise blockchain company and a year working in insurance broking. He is currently advisor to two start-ups providing expertise on tokenomics and commercial operating models.
Ulrich Volz is Professor of Economics and Director of the Centre for Sustainable Finance at SOAS, University of London. He is also a Senior Research Fellow at the German Institute of Development and Sustainability (IDOS), Visiting Professor at the London School of Economics and Political Science, Honorary Professor of Economics at the University of Leipzig, and a Research Fellow at the Centre for Economic Policy Research (CEPR). At SOAS, he previously served as Head of the Department of Economics and Member of the University’s Executive Board.
Ulrich is academic director of the University Network for Strengthening Macrofinancial Resilience to Climate and Environmental Change, a co-chair of the Debt Relief for a Green and Inclusive Recovery initiative, and co-chair of the Global Research Alliance for Sustainable Finance and Investment. Ulrich was appointed by the Brazilian G20 Presidency to the Group of Experts of the G20 Taskforce on a Global Mobilization against Climate Change (TF-CLIMA).
He also serves on the Sustainable Finance Advisory Committee of the German Federal Government, the Economic Advisory Network of the German Federal Ministry for Economic Cooperation and Development, the advisory panel of the Glasgow Financial Alliance for Net Zero (GFANZ), the International Advisory Committee for the Climate/SDGs Debt Swap Mechanism of the UN Economic and Social Commission for Western Asia (UN ESCWA), and the Alliance for Financial Inclusion’s Research Advisory Council for Inclusive Green Finance. Ulrich was Banque de France Chair at the École des Hautes Études en Sciences Sociales (EHESS) in Paris, and taught at Peking University, Kobe University, Hertie School of Governance, Freie Universität Berlin, Central University of Finance and Economics, and the Institute of Developing Economies (IDE-JETRO).
He spent stints working at the European Central Bank and European Bank for Reconstruction and Development and held visiting positions at the University of Oxford, University of Birmingham, Aoyama Gakuin University, ECB, Bank Indonesia, Bank Negara Malaysia and the Asian Development Bank Institute, where he previously served on the Advisory Council. Ulrich was part of the UN Inquiry into the Design of a Sustainable Financial System, a member of the NGFS-INSPIRE Study Group on Biodiversity and Financial Stability, and a member of the World Bank’s Green Recovery Monitoring and Evaluation Technical Working Group. He has acted as an advisor to several governments, central banks, international organisations and development agencies on matters of macroeconomic policy, climate risk and sustainable finance, and financial sector development. Ulrich obtained a doctorate in economics from Freie Universität Berlin and was a Fox International Fellow and Max Kade Scholar at Yale University.
About the RAMP University Network Seminar Series
The RAMP University Network Seminar Series provides a forum for discussion on the latest research related to the economics and finance of climate change adaptation, including amongst others, research on climate change and macroeconomic and financial stability, climate change and sovereign risk, adaptation finance, disaster risk finance and insurance, climate-sensitive budgeting and public financial management, costs and benefits of investing in climate resilience, and programme design.
About the RAMP University Network
The University Network for Strengthening Macrofinancial Resilience to Climate and Environmental Change was established to promote multi-disciplinary academic teaching and research in areas important for strengthening macrofinancial resilience to climate change. The University Network is a key part of the Resilience Adaptation Mainstreaming Program (RAMP). The objective of RAMP is to accelerate climate adaptation in developing countries by building capacity in ministries of finance, planning and economics to understand, plan for, and finance climate adaptation actions.
The RAMP University Network consists of global universities that seek to build capacities to carry out relevant high-quality teaching and research and acts as a strategic and knowledge partner of major international organisations working in this field. The University Network develops curricula and course materials and organises teacher trainings to enable universities in climate-vulnerable countries to offer high-quality graduate-level teaching and professional training. This will enable future and current leaders to effectively address climate-related macro-financial risks and vulnerabilities that threaten public finances, financial and macroeconomic stability, and economic development.
RAMP is a collaboration between the World Resources Institute and the Centre for Sustainable Finance at SOAS, University of London. The University Network is managed by a Secretariat hosted by SOAS.
