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The 2011 Japanese earthquake, tsunami and nuclear crisis: evidence of contagion from international financial markets

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  • Asongu Simplice

    ()
    (Yaoundé/Cameroun)

Abstract

Purpose – Natural disasters may inflict significant damage upon international financial markets. The purpose of this study is to investigate if any contagion effect occurred in the immediate aftermath of the Japanese earthquake, tsunami and subsequent nuclear crisis. Design/methodology/approach – Using 33 international stock indices and exchange rates, this paper uses heteroscedasticity biases based on correlation coefficients to examine if any contagion occurred across financial markets after the March 11, 2011 Japanese earthquake, tsunami and nuclear crisis. The sample period is partitioned into two sections: the 12-month pre-earthquake period (March 11, 2010 to March 10, 2011) and the 2-month post-earthquake period (March 11, 2011 to May 10, 2011). While the stability period is defined as the pre-earthquake period, the turbulent (turmoil) period is defined as the post-earthquake period. In a bid to ensure robustness of our findings, the turmoil period is further partitioned into two equal sections: the 1-month (short-term) post-earthquake period (March 11, 2011 to April 10, 2011), and the 2-month (medium-term) post-earthquake (March 11, 2011 to May 10, 2011). Findings – Findings reveal that, while no sampled foreign exchange markets suffered from contagion, stock markets of Taiwan, Bahrain, Saudi Arabia and South Africa witnessed a contagion effect. Practical implications – Our results have two paramount implications. Firstly, we have confirmed existing consensus that in the face of natural crises that could take an international scale, emerging markets are contagiously affected for the most part. Secondly, the empirical evidence also suggest that international financial market transmissions not only occur during financial crisis; natural disaster effects should not be undermined. Originality/value – This paper has shown that the correlation structure of international financial markets are also affected by high profile natural disasters.

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File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/The-Japanese-earthquake-tsunami-and-nuclear-crisis.-Evidence-of-contagion-from-international-financial-markets.pdf
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Bibliographic Info

Paper provided by African Governance and Development Institute. in its series Working Papers with number 11/006.

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Length: 24
Date of creation: 29 May 2011
Date of revision:
Handle: RePEc:agd:wpaper:11/006

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Keywords: Japanese Earthquake; Contagion; International Financial Markets;

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  11. Simplice A, Asongu, 2011. "Globalization, financial crisis and contagion: time-dynamic evidence from financial markets of developing countries," MPRA Paper 30120, University Library of Munich, Germany.
  12. Collins, Daryl & Biekpe, Nicholas, 2003. "Contagion: a fear for African equity markets?," Journal of Economics and Business, Elsevier, Elsevier, vol. 55(3), pages 285-297.
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  14. Asongu Simplice, 2011. "Political Crises and Risk of Financial Contagion in Developing Countries: Evidence from Africa," Working Papers, African Governance and Development Institute. 11/003, African Governance and Development Institute..
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Cited by:
  1. Simplice A, Asongu, 2011. "Political crises and risk of financial contagion in developing countries: Evidence from Africa," MPRA Paper 37459, University Library of Munich, Germany.
  2. Asongu Simplice, 2011. "Globalization, financial crisis and contagion: time-dynamic evidence from financial markets of developing countries," Working Papers, African Governance and Development Institute. 11/004, African Governance and Development Institute..
  3. Simplice Anutechia ASONGU, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," Chapters of Financial Aspects of Recent Trends in the Global Economy book, ASERS Publishing, in: Rajmund Mirdala (ed.), Financial Aspects of Recent Trends in the Global Economy, volume 1, chapter 1, pages 12-32 ASERS Publishing.
  4. Jacques JAUSSAUD & Julien MARTINE & Serge REY, 2012. "Japon : pistes pour l'analyse des conséquences économiques et managériales du grand tremblement de terre du 11 mars 2011," Working Papers, CATT - UPPA - Université de Pau et des Pays de l'Adour 2011-2012_9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jun 2012.

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