Bhanupong Nidhiprabha, Thammasat University: The central theme of the paper is that disasters cause threefold harm to developing countries: direct costs to human and physical assets, deteriorating macroeconomic stability, and hampering access to international capital markets. The authors analyze the impact of natural disasters on financial accessibility and examine whether disaster relief aid can improve the sovereign rating. Financial accessibility is reduced when the disaster-hit countries must face higher borrowing costs due to sovereign risk downgrading.
The impacts of natural disasters on sovereign credit ratings are analyzed by using annual 87 country panel data from 1995 to 2014. Samples are divided into high- and low-income groups. The focus is on the latter. The authors employ the changes in Standard and Poor's (S&P) sovereign ratings (from a scale of 0 to 20) as an endogenous variable in the fixed-effect model. Exogenous variables in the model include GDP growth, inflation rate, changes...