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The dynamic contagion of the global financial crisis into Japanese markets

Author

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  • Miyakoshi, Tatsuyoshi
  • Takahashi, Toyoharu
  • Shimada, Junji
  • Tsukuda, Yoshihiko

Abstract

This paper investigates the risk contagion channel of the global financial crisis into Japan using daily data on bond risk premiums for the financial and manufacturing industries from July 18, 2006 to May 25, 2010. We employ a bivariate EGARCH model with the constant exogenous contagion impacts of foreign industries and the time-varying endogenous contagion impacts of domestic industries. We find evidence that: (i) a constant exogenous impact from foreign industries appears in the risk premium for 5-year bonds issued by manufacturing industry firms, and (ii) contagion only exists from the manufacturing industry to the financial industry, and that there is no evidence of any reverse causation, even during the Lehman Brothers shock on September 15, 2008. Thus, in Japan, risk transfers from foreign industries to the domestic manufacturing industry, and thence to the domestic financial industry.

Suggested Citation

  • Miyakoshi, Tatsuyoshi & Takahashi, Toyoharu & Shimada, Junji & Tsukuda, Yoshihiko, 2014. "The dynamic contagion of the global financial crisis into Japanese markets," Japan and the World Economy, Elsevier, vol. 31(C), pages 47-53.
    • Handle: RePEc:eee:japwor:v:31:y:2014:i:c:p:47-53
    DOI: 10.1016/j.japwor.2014.05.003
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    References listed on IDEAS

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    Cited by:

    1. Chowdhury, Biplob & Jeyasreedharan, Nagaratnam, 2019. "An empirical examination of the jump and diffusion aspects of asset pricing: Japanese evidence," Working Papers 2019-02, University of Tasmania, Tasmanian School of Business and Economics.
    2. Tarishi Matsuoka, 2022. "Financial Contagion in a Two‐Country Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(7), pages 2149-2172, October.
    3. KIM, Hyonok & WILCOX, James A. & YASUDA, Yukihiro & 安田, 行宏, 2016. "Shocks and Shock Absorbers in Japanese Bonds and Banks During the Global Financial Crisis," Working Paper Series G-1-16, Hitotsubashi University Center for Financial Research.

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    More about this item

    Keywords

    Global financial crisis; Risk premium; Sector index; Dynamic contagion;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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