Mer, 20/10/2021 - 12:00 / 13:00
405, Viale Romania
Speaker: Stefano Rossi , Università Bocconi
We study the role of insurance companies in propagating liquidity shocks to the real economy. We use natural disasters as our instrument to identify exogenous shifts in capital-market liquidity, and study whether capital-market liquidity affects regional-level fiscal conditions and output. Aggregate disaster-driven bonds sales of disaster-unaffected municipal bonds by exposed insurers cause low GDP growth and high unemployment. In micro data, natural disasters trigger large, unexpected redemptions of property-insurance contracts, causing: fire sales of municipal bonds; increased borrowing costs in primary markets; decreased muni issuance; lower investment in muni-reliant sectors. Therefore, insurance companies do propagate liquidity shocks to the real economy.
Further information regarding the paper at the following link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3656518