Comments on Natural Disasters and International Financial Accessibility in Developing Countries

Wen-jen Hsieh, National Cheng Kung University: This article examines the impact of natural disasters on the financial accessibility of countries and whether foreign aid provided to disaster-affected countries can contribute to restoring the levels of the countries’ credit ratings (provided by Standard & Poor's). A panel data set of 87 countries during the period 1995 to 2014 has been obtained from the International Disasters Database (EM-DAT)¹ for detailed regression analysis. The estimated results from the fixed-effects models suggest that natural disasters, especially droughts and storms, cause significant negative impacts on the financial accessibility of “developing countries.” To be more specific, natural disasters can lower the credit rating of affected developing countries, and the poor rating would then generate obstacles for such countries to efficiently obtain necessary foreign aid for disaster rescue/relief, further delaying the recovery process. Because of the observations that these developing countries are especially vulnerable to natural...