Natural risk disclosure, monetary policy, and international trade: empirical evidence from global data

The increasing frequency of extreme natural risks, coupled with volatility in the international financial environment, has exerted dual pressures on national monetary policy regulation and the global trade landscape. Based on a global panel dataset covering 62 countries from 2005 to 2023, this study employs three-stage least squares (3SLS), fixed-effects panel models, and an endogenous Kernel Regularized Quantile Regression (KRQR) to systematically examine the independent and interactive effects of natural risk shocks and policy-rate changes on international trade. The baseline findings highlight the significant synergistic disruptive effects in emerging markets (EMs). Post-disaster forced monetary tightening significantly exacerbated the export contraction, while imports exhibited post-disaster rigidity, showing minimal sensitivity to this dual shock. Crucially, the non-linear KRQR estimates reveal a profound distributional asymmetry. While advanced economies (AEs) demonstrate the macro-financial capacity for post-shock trade recovery, EMs suffer from a complete absence of upside resilience, falling into a liquidity-induced trade stagnation under the compound shock. This paper explores the macroeconomic consequences of natural risks from a unique perspective focusing on the monetary-trade transmission mechanism. It emphasizes the crucial role of central banks in balancing inflation targets and trade stability in vulnerable economies amid escalating natural risks.