The Fiscal Implications of Hurricane Strikes in the Caribbean

We explore the fiscal impacts of hurricane strikes. To this end we derive a damage index from a physical wind field model, and assemble a panel data set of Caribbean countries over 36 years. Our results, based on panel var and impulse response frameworks, show that a typical strike significantly increases government expenditure in the year of the strike, with a smaller lagged effect in the subsequent year. Overall, the increase in expenditure has a negative impact on the budget balance in the year of the hurricane.