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

Author

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  • Simplice A. Asongu

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 the 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 - The results have two paramount implications. First, the paper has 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. Second, the empirical evidence also suggests 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.

Suggested Citation

  • Simplice A. Asongu, 2012. "The 2011 Japanese earthquake, tsunami and nuclear crisis: Evidence of contagion from international financial markets," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(4), pages 340-353, November.
  • Handle: RePEc:eme:jfeppp:v:4:y:2012:i:4:p:340-353
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. repec:eee:riibaf:v:41:y:2017:i:c:p:556-576 is not listed on IDEAS
    4. Serge REY & Jacques JAUSSAUD & Julien MARTINE, 2012. "Japon : pistes pour l’analyse des conséquences économiques et managériales du Grand Tremblement de Terre du 11 mars 2011," Working Papers 2011-2012_9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jun 2012.
    5. Asongu, Simplice, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," MPRA Paper 56803, University Library of Munich, Germany.

    More about this item

    Keywords

    Japanese earthquake; Contagion; International financial markets; Japan; Earthquakes; Financial markets; Stock markets;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F30 - International Economics - - International Finance - - - General

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