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Stefan Mittnik, Willi Semmler, and Alexander Haider
Recent research in financial economics has shown that rare large disasters have the potential to disrupt financial sectors via the destruction of capital stocks and jumps in risk premia. These disruptions often entail negative feedback e?ects on the macroecon-omy. Research on disaster risks has also actively been pursued in the macroeconomic models of climate change. Our paper uses insights from the former work to study disaster risks in the macroeconomics of climate change and to spell out policy needs. Empirically the link between carbon dioxide emission and the frequency of climate re-lated disaster is investigated using cross-sectional and panel data. The modeling part then uses a multi-phase dynamic macro model to explore this causal nexus and the e?ects of rare large disasters resulting in capital losses and rising risk premia. Our proposed multi-phase dynamic model, incorporating climate-related disaster shocks and their aftermath as one phase, is suitable for studying mitigation and adaptation policies.
Stefan Mittnik, Willi Semmler, and Alexander Haider

is also a significant strand of literature on climate disasters focusing on physical destruction of countries and regions. The focus has been on destruction caused by rare large disasters and on slow temperature increases and its negative effects on long-run productivity ( IMF, 2017 ). Particularly important is the study by Burke et al. (2015) which explores the non-linear effects of climate change based on the work of Gumbel (1958) . A related study is given by Cantelmo et al. (2017) , where climate disaster losses are introduced in a macroeconomic model as

International Monetary Fund. Research Dept.
This issue of the IMF Research Perspective looks at the inter-connectedness of the world economic system and how diverse shocks can affect global supply chains. The articles in this issue track the way COVID-19 triggered disruptions in the supply chain and explains why trade networks are so difficult to disentangle. However, the pandemic is not the only event affecting global supply chains; cross-border spillovers of technology wars and natural disasters are other factors to consider. The overarching message from these articles is clear: there is a need for international cooperation to deal with the consequences of these shocks—whether it is ending the COVID-19 pandemic or mitigating climate change.
International Monetary Fund. Research Dept.

used Thailand as a key supplier in Southeast Asia reportedly had to pause their car production and sales globally. The cross-border implications of disasters through the global supply chain deserve in-depth analysis to inform policy, especially in the age of climate change, when climate-related disasters are set to rise in frequency and intensity. Are climate disasters propagated through international trade linkages? How are sectors in foreign countries affected? How does that change our thinking about macro-financial policies related to climate change

Stefan Mittnik, Willi Semmler, and Alexander Haider

Front Matter Page Research Department Contents 1. Introduction 2. Empirics of disaster frequency and severity 3. A model of disaster shocks and financing contractions 3.1. A three-phase Model 3.2. Results of the three-phase model 3.3. The use of bond financing 4. Other policies for the green transition and disaster management 5. Conclusion References Appendix A.1. Fixed effects Coefficients for Panel Model A.2. Empirics of climate disaster cost A.3. Base line macro dynamic model Tables 1. Poisson Regression