Natural Disaster Modeling with the DSGE DIGNAD Framework: A Study of Madagascar

This study utilizes the DSGE model DIGNAD to assess the economic impacts of natural disasters on Madagascar. Four distinct scenarios are analyzed: the first scenario (zero scenario) simulates the effects of a natural shock occurring in 2027. The second scenario evaluates the impact of investing 1% of GDP in resilient infrastructure over a 5-year period preceding the shock. The third scenario examines the outcomes of a similar 1% GDP investment in standard, non-resilient infrastructurebefore the shock. The fourth scenario considers the implications of a 2% GDP investment in resilient infrastructure aimed at enhancing the country’s relatively low GDP, currently at around 31%. The findings reveal a projected contraction of approximately 6% in GDP growth in the event of the shock. Investing in resilient infrastructure significantly mitigates the decline in growth, reducing it by about 2% of GDP. Despite this benefit, the substantial financial requirements for such infrastructure present a considerable challenge for Madagascar.