In the eye of the storm: Heterogeneous effects of extreme climate events on supply chains

This paper examines the causal impact of extreme climate events - such as intense rains, floods, and flash floods - on supply chain dynamics. We construct a comprehensive map of the Brazilian supply network using proprietary data on over 1.7 billion inter-firm transactions, including Pix (fast payments), boletos (invoices), and wire transfers (TEDs). By linking these data to detailed records of natural disasters, we assess how extreme climate events disrupt supplier-customer relationships. Exploiting a multiperiod difference-in-differences strategy, we estimate the causal effects of disasters on firm-to-firm payment flows. Our results show that affected suppliers experience significant reductions in payments from customers located outside the disaster region, with average declines of up to 8% following a shock. These effects are persistent and highly heterogeneous: agricultural firms face the most severe disruptions, with payment reductions approaching 20%, while other sectors such as construction and services also exhibit meaningful declines. Our findings contribute to a growing literature on climate-related economic fragility and production network resilience.