THE SYNTHETIC REGRESSION METHOD: HOW THE INDIAN OCEAN TSUNAMI AFFECTS GROWTH TRAJECTORIES

In recent works, scholars have widely used the synthetic control method (SCM) for analyzing the effect of a catastrophic disaster on economic growth. Unlike the traditional SCM, we propose the so-called synthetic regression method to choose a suitable synthetic control group by employing a comparing series procedure. We then use the selected group to estimate our outcomes of interest. We apply the synthetic regression method to examine the causal effects of the 2004 Asian tsunami on economic growth in Aceh, the Indonesian province severely hit by the tsunami. Our results show that the tsunami has an unintended effect on Aceh’s economic growth performance. The findings of the paper lead us to a better method for analyzing the growth trajectories, particularly for Aceh after the 2004 tsunami