The impact of tropical storms on the accumulation and composition of government debt

Abstract This paper investigates the impact of tropical storms on government debt accumulation and decomposition. To this end, we combine quarterly debt data and tropical storm loss data for the period 1993–2013 for the Eastern Caribbean. Our econometric results show that damaging storms cause debt to increase up to three quarters after the event, where this increase can be considerable for damaging enough storms. Much of this increase in debt is due to borrowing from foreign lenders by the central government. At the same time, there is also some shifting of the share of debt toward public corporations, although these tend to react more by financing from domestic sources.