A consistent approach for probabilistic residential flood loss modeling in Europe

In view of globally increasing flood losses, a significantly improved and more efficient flood risk management and adaptation policy are needed. One prerequisite is reliable risk assessments on the continental scale. Flood loss modeling and risk assessments for Europe are until now based on regional approaches using deterministic depth‐damage functions. Uncertainties associated with the risk estimation are hardly known. To reduce these shortcomings, we present a novel, consistent approach for probabilistic flood loss modeling for Europe, based on the upscaling of the Bayesian Network Flood Loss Estimation MOdel for the private sector, BN‐FLEMOps. The model is applied on the mesoscale in the whole of Europe and can be adapted to regional situations. BN‐FLEMOps is validated in three case studies in Italy, Austria, and Germany. The officially reported loss figures of the past flood events are within the 95% quantile range of the probabilistic loss estimation, for all three case studies. In the Italian, Austrian, and German case studies, the median loss estimate shows an overestimation by 28% (2.1 million euro) and 305% (5.8 million euro) and an underestimation by 43% (104 million euro), respectively. In two of the three case studies, the performance of the model improved, when updated with empirical damage data from the area of interest. This approach represents a step forward in European wide flood risk modeling, since it delivers consistent flood loss estimates and inherently provides uncertainty information. Further validation and tests with respect to adapting the model to different European regions are recommended

On the Determinants of Currency Crises: The Role of Model Uncertainty

We tackle explicitly the issue of model uncertainty in the framework of binary variable models of currency crises. Using Bayesian model averaging techniques, we assess the robustness of the explanatory variables proposed in the recent literature for both static and dynamic models. Our results indicate that the variables belonging to the set of macroeconomic fundamentals proposed by the literature are very fragile determinants of the occurrence of currency crises. The results improve if the crisis index identifies a crisis period (defined as the period up to a year before a crisis) instead of a crisis occurrence. In this setting, the extent of real exchange rate misalignment and financial market indicators appear as robust determinants of crisis periods

Prospect theory, mitigation and adaptation to climate change

Climate change is one of the most pressing challenges in current environmental policy. Appropriate policies intended to stimulate efficient adaptation and mitigation should not exclusively rely on the assumption of the homo oeconomicus, but take advantage of well-researched alternative behavioural patterns. Prospect theory provides a number of climate-relevant insights, such as the notion that evaluations of outcomes are reference dependent, and the relevance of perceived certainty of outcomes. This paper systematically reviews what prospect theory can offer to analyse mitigation and adaptation. It is shown that accounting for reference dependence and certainty effects contributes to a better understanding of some well-known puzzles in the climate debate, including (but not limited to) the different uptake of mitigation and adaptation amongst individuals and nations, the role of technical vs. financial adaptation, and the apparent preference for hard protection measures in coastal adaptation. Finally, concrete possibilities for empirical research on these effects are proposed