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

Author

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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.

Suggested Citation

  • Asongu Simplice, 2011. "The 2011 Japanese earthquake, tsunami and nuclear crisis: evidence of contagion from international financial markets," Working Papers of the African Governance and Development Institute. 11/006, African Governance and Development Institute..
    • Handle: RePEc:agd:wpaper:11/006
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    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. Simplice A ASONGU, 2012. "Globalization Financial Crisis And Contagion Time Dynamic Evidence From Financial Markets Of Developing Countries," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 3(2), pages 131-139.
    4. Nakano, Shuhei & Hirata, Yoshito & Iwayama, Koji & Aihara, Kazuyuki, 2015. "Intra-day response of foreign exchange markets after the Tohoku-Oki earthquake," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 419(C), pages 203-214.
    5. Samba Diop & Simplice A. Asongu & Vanessa S. Tchamyou, 2021. "Mitigating the Macroeconomic Impact of Severe Natural Disasters in Africa: Policy Synergies," Working Papers 21/094, European Xtramile Centre of African Studies (EXCAS).
    6. Asongu Simplice, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," Working Papers of the African Governance and Development Institute. 13/035, African Governance and Development Institute..
    7. 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 of CATT hal-01880346, HAL.
    8. Valizadeh, Pourya & Karali, Berna & Ferreira, Susana, 2017. "Ripple effects of the 2011 Japan earthquake on international stock markets," Research in International Business and Finance, Elsevier, vol. 41(C), pages 556-576.
    9. Guangxi Cao & Wei Xu & Yu Guo, 2015. "Effects of climatic events on the Chinese stock market: applying event analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 77(3), pages 1979-1992, July.
    10. Sedegah Kordzo & Odhiambo Nicholas M., 2021. "A Review of the Impact of External Shocks on Monetary Policy Effectiveness in Non-WAEMU Countries," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 31(3), pages 37-59, September.

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    More about this item

    Keywords

    Japanese Earthquake; Contagion; International Financial Markets;
    All these keywords.

    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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