The dynamic contagion of the global financial crisis into Japanese markets

Tatsuyoshi Miyakoshi, Toyoharu Takahashi, Junji Shimada, Yoshihiko Tsukuda

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

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.

Original languageEnglish
Pages (from-to)47-53
Number of pages7
JournalJapan and the World Economy
Volume31
DOIs
Publication statusPublished - 2014 Aug

Keywords

  • Dynamic contagion
  • Global financial crisis
  • Risk premium
  • Sector index

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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