Natural Disasters and International Financial Accessibility in Developing Countries

This study examines the impact of natural disasters on affected countries’ accessibility to international financial resources. We find empirical evidence that natural disasters significantly downgrade the sovereign credit rating of an affected country, an indicator of international financial accessibility. This finding is robust in developing countries, implying that they are faced with additional difficulties in financing post-disaster recovery costs compared with developed countries. Among disasters, droughts and storms display a particularly significant downgrading effect. Further results show that foreign aid from the international community helps to improve the accessibility, implying a possible acceleration of the post-disaster recovery in recipient countries.