View metadata

dc.titleNatural Disasters, Adaptation and Default Risk
dc.contributor.authorBolivar, Carlos
dc.contributor.authorDueñas, Federico
dc.contributor.authorValencia, Oscar
dc.contributor.orgunitCountry Department Central America, Haiti, Mexico, Panama and the Dominican Republic
dc.date.available2026-09-23T00:09:00
dc.date.issue2026-09-23T00:09:00
dc.description.abstractThis paper studies how sovereign default risk shapes public investment in climate adaptation. We build a sovereign default model in which governments invest in adaptation to reduce disaster damages. Sovereign risk depresses adaptation through two mechanisms: higher borrowing costs and debt overhang under long-term debt. These effects generate feedback between risk and disaster exposure. Using a new panel of adaptation spending from budget records, we show that after catastrophic disasters spreads rise where prior adaptation was low, and that losses are smaller where adaptation budgets recently increased. In our calibration, adaptation yields the largest welfare gains near the default boundary, where financing is tightest.
dc.format.extent64
dc.identifier.doihttp://dx.doi.org/10.18235/0014514
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Natural-Disasters-Adaptation-and-Default-Risk.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectDisaster
dc.subjectNatural Disaster
dc.subjectCapital Formation
dc.subjectSovereign Default
dc.subjectClimate Change Adaptation
dc.subjectFinancial Bond
dc.subjectDrought
dc.subjectGreen Bond
dc.subjectForest Resources
dc.subjectSovereign Guaranteed Credit Risk
dc.subject.jelcodeF41 - Open Economy Macroeconomics
dc.subject.jelcodeF34 - International Lending and Debt Problems
dc.subject.jelcodeH63 - Debt • Debt Management • Sovereign Debt
dc.subject.jelcodeQ54 - Climate • Natural Disasters and Their Management • Global Warming
dc.typeWorking Papers
idb.identifier.pubnumberIDB-WP-01880
idb.operationRG-T4529
Return to Publication