ABSTRACT
This chapter compares small and large countries, and controls for countries' levels of income. It analyses the impact on aggregate fiscal policy and explores the impact of disasters on individual revenue and expenditure components, in order to better understand differences in the fiscal impact of disasters. The chapter discusses the data and takes an initial look at the questions via a preliminary data analysis. Small states are as defined by the Commonwealth Secretariat and the World Bank criterion which sets a population ceiling of 1.5 million. The empirical analysis is based on panel vector autoregressions. The few studies assessing the fiscal consequences of natural disasters suggest that natural disasters induce a pro-cyclical fiscal response in developing countries, and conversely, a countercyclical fiscal response in advanced countries, respectively. Revenue and expenditure, and component effects, are estimated separately due to sample size.
