Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper investigates the impact of disasters caused by natural hazards on exchange rate movements in different country groups with different exchange rate regimes. Using a panel local projection model with a high-frequency monthly dataset of 177 countries during 1970M1–2019M12, we find that exchange rate movements are more sensitive to disasters in emerging markets and developing countries (EMDEs) than in advanced economies (AEs). Furthermore, exchange rate reactions to natural shocks depend on exchange rate regimes adopted by EMDEs. On average, both nominal and real exchange rates could depreciate up to 6 percent two years after the disasters in non-pegged regimes. Our findings suggest that EMDEs with flexible exchange rate regimes could observe a faster recovery through nominal and real depreciations, although they should be mindful about policy implications that may arise from large exchange rate fluctuations caused by disaster shocks.