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TheMacroeconomic
ReturnsofInvestmentinResiliencetoNatural
DisastersunderClimate
Change:ADSGEApproach
EmilioFernandez-Corugedo,AndresGonzalez-Gomez,and
AlejandroGuerson
WP/23/138
IMFWorkingPapersdescriberesearchin
progressbytheauthor(s)andarepublishedto
elicitcommentsandtoencouragedebate.
TheviewsexpressedinIMFWorkingPapersare
thoseoftheauthor(s)anddonotnecessarily
representtheviewsoftheIMF,itsExecutiveBoard,
orIMFmanagement.
2023
JUN
NAr
rARY
*TheauthorswouldliketothankSòniaMu?oz,AndrewBergandtheparticipantsinseminarsattheInternationalMonetaryFundandtheEasternCaribbeanCentralBankforinsightfulcommentsandsuggestions.
?2023InternationalMonetaryFund
WP/23/138
IMFWorkingPaper
WesternHemisphereDepartment
TheMacroeconomicReturnsofInvestmentinResiliencetoNaturalDisastersunderClimateChange:A
DSGEApproach
PreparedbyEmilioFernandez-Corugedo,AndresGonzalez-Gomez,andAlejandroGuerson*
AuthorizedfordistributionbyChristophDuenwald,SòniaMu?oz,andAndrewBergJune2023
IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicit
commentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseofthe
author(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.
ABSTRACT:ThispaperpresentsaMarkovswitchingdynamicstochasticgeneralequilibriummodeldesignedtoevaluatethemacroeconomicreturnofadaptationinvestmenttonaturaldisasters(NDs)andtheimpactof
climatechange.WhilethemodelfollowstheexistingliteratureinassumingthatNDsdestroyashareofthe
publicandprivatecapitalstocksandagovernmentthatcaninvestinadaptationatanadditionalcost,itaddsseveralfeaturesthatarekeytotheanalysis,bothinthenear(transition)andlong(steadystate)terms.Thoseincludeincompletemarkets,financialfrictionswithcollateralcon
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