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

Josué, ANDRIANADY (2024): Natural Disaster Modeling with the DSGE DIGNAD Framework: A Study of Madagascar.

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: DSGE model, DIGNAD, natural disasters, economic impact, resilient infrastructure, Madagascar, GDP growth, investment scenarios.
• Subjects: A - General Economics and Teaching > A1 - General Economics; A - General Economics and Teaching > A1 - General Economics > A10 - General; E - Macroeconomics and Monetary Economics > E0 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General

References

[1] Acevelo, Gone with the Wind: Estimating Hurri cane and Climate Change Costs in the Caribbean, 2016.

[2] Andrianady, ANDRIANADY Ravahiny Jo sue and Randriamifidy, Fitiavana Michael and Andrianavony, Kanto Jovianah, Heat and Economics: Climate Change’s Influ ence on Madagascar’s GDP (September 4, 2023). Available at SSRN: https://ssrn.com/ abstract=4561001 or http://dx.doi.org/10. 2139/ssrn.4561001.

[3] Buffie, E. F., Berg, A., Pattillo, C., Portillo, R., & Zanna, L. F. (2012). Public investment, growth, and debt sustainability: Putting to gether the pieces. IMF Working Paper, WP 12/144.

[4] Carver, Edward. A Madagascar forest long pro tected by its remoteness is now threatened by it. Mongabay Series: Conservation in Mada gascar, Forest Trackers, 2020. https://news. mongabay.com/202

[5] Cochrane, K. L., Rakotondrazafy, H., Aswani, S., Chaigneau, T., Downey-Breedt, N., Lemahieu, A., Paytan, A., Pecl, G., Plag´anyi, E., Popova, E., van Putten, E. I., Sauer, W. H. H., Byfield, V., Gasalla, M. A., van Gennip, S. J., Malherbe, W., Rabary, A., Rabearisoa, A., Ramaroson, N., Randrianarimanana, V., Scott, L., & Tsimanao raty, P. M. (2019). Tools to enrich vulnerability assessment and adaptation planning for coastal communities in data-poor regions: application to Science, 5(JAN).

[6] Chesney, R., and A. M. Moran. Climate, Con f lict, and Governance in Africa: Pinpointing Risks and Opportunities: Final Program Re port: 2009-2016. 2016. Strauss Center’s Climate Change and African Political Stability, Austin, Texas, USA.

[7] EM-DAT, EM-DAT Database, 2022. Available at: https://www.emdat.be/ [8] IMF Country Report No. 22/342: Republic of Madagascar, November 2022, Technical Assis tance Report– Climate Macroeconomic Assess ment Program. International Monetary Fund, 2022.

[9] Koks, E. E., Rozenberg, J., Zorn, C., et al. A global multi-hazard risk analysis of road and railway infrastructure assets. Nat Commun 10, 2677 (2019). https://doi.org/10.1038/ s41467-019-10442-3.

[10] Llopis, J. C. Down by the riverside: cyclone driven floods and the expansion of swidden agri culture in South-western Madagascar. In J. Ab bink (Ed.), The environmental crunch in Africa: growth narratives vs. local realities, pp. 241-268. Springer International, New York, New York, USA, 2018.

[11] Marto, R., Papageorgiou, C., & Klyuev, V. (2018). Building resilience to natural disasters: An application to small developing states. Jour nal of Development Economics, 135, November 2018, 574–586.

[12] Rakotondravony, H. A., I. Abdallah, H. An drianaivo, L. N. Andrianarison, K. Hetz, P. T. Mahatante, H. N. Masezamana, N. A. H. Rakotoarivony, R. P. Rakotonaivo, S. Ra manantsialonina, J.-F. Randrianjatovo, A. A. Rasamison, and M. S. (adelphi/GOPA). ´ Etat des lieux des ´etudes de la vuln´erabilit´e `a Madagas car: revue bibliographique. 2018. Antananarivo, Madagascar: GIZ, Bonn, Germany.

[13] World Bank. Climate Risk and Adaptation Country Profile: Madagascar, November 2011.