Banking Development and the Economic Impact of Natural Disasters: From Short to Long Term Effects

ABSTRACT This paper investigates how financial development and local banking structures shape the economic resilience of communities in the aftermath of natural disasters. Focusing on Italian municipalities hit by earthquakes between 2008 and 2022, we explore the role of banking presence, particularly cooperative banks, in supporting recovery. Using a staggered difference‐in‐differences approach, we find that while employment levels are largely unaffected in the short term, the number of enterprises initially declines but rebounds significantly over the long run. The presence of local banks, and especially cooperative banks, is associated with stronger recovery patterns, highlighting their importance in enhancing community resilience.