Abstract
Purpose: Whether this earthquake would become a turning point of the high oil price and whether it would have big impact on yen exchange rate are two issues to be discussed in this paper. Design/methodology/approach: To analyze deeply the internal relations between changes in yen exchange rate caused by Japan’s earthquake and price fluctuation of international crude oil, this research chooses middle rate of yen exchange rate during the 45 days around Japan’s earthquake and price data of international crude oil to do an empirical study, uses VAR model and HP trend decomposition to estimate the mutual effect of yen exchange rate change and price fluctuation of international crude oil in this period. Findings: It has been found in the empirical study with VAR model and HP filter decomposition model on the yen exchange rate and the international crude oil price fluctuation during 45 days around Japan’s earthquake that: the fluctuation of yen exchange rate around the earthquake is one of the main reasons for the drastic fluctuation of international crude oil price in that period. The fluctuation of international crude oil price directly triggered by yen exchange rate occupies 13.54% of its total variance. There is a long-term interactive relationship between yen exchange rate and international crude oil price. The upward trend of international crude oil price after the earthquake was obvious, while yen exchange rate remained relatively stable after the earthquake. Originality/value: As economic globalization goes deeper, the influence of natural disasters on international financial market and world economy will become more and more obvious. It has a great revelatory meaning to studying further each kind of natural disaster’s impacts on international financial market and world economics.
Highlights
Since the establishment of Jamaica System, major capitalist countries in the world generally have built the floating exchange rate system
To analyze deeply the internal relations between changes in yen exchange rate caused by Japan’s earthquake and price fluctuation of international crude oil, this research chooses middle rate of yen exchange rate during the 45 days around Japan’s earthquake and price data of international crude oil to do an empirical study, uses vector autoregression model (VAR) model and HP trend decomposition to estimate the mutual effect of yen exchange rate change and price fluctuation of international crude oil in this period, and predicts the trend of yen exchange rate and international crude oil price in the short or medium term
Results of variance decomposition show that: in the influencing factors of international crude oil price fluctuation, the factor of yen exchange rate is 13.54% of all influencing factors at the maximum, which shows that the trend of yen exchange rate around Japan’s earthquake really has great influence on fluctuations of international crude oil price
Summary
Since the establishment of Jamaica System, major capitalist countries in the world generally have built the floating exchange rate system. Prices of international energy and staple commodities climbed and the world economy fell into inflation generally. Yen appreciated quickly and international crude oil price was pushed up, which led to the crash of global stock market. To suppress the fluctuation of financial market brought by further quick appreciation of yen, the Group of Seven (G7) announced on March 18 to intervene foreign exchange market jointly. Bank of Japan carried out large-scale capital injection plan to the market twice continuously. These stabilized the market fluctuations to some extent. Whether this earthquake would become a turning point of the high oil price and whether it would have big impact on yen exchange rate are two issues to be discussed in this paper. To analyze deeply the internal relations between changes in yen exchange rate caused by Japan’s earthquake and price fluctuation of international crude oil, this research chooses middle rate of yen exchange rate during the 45 days around Japan’s earthquake and price data of international crude oil to do an empirical study, uses VAR model and HP trend decomposition to estimate the mutual effect of yen exchange rate change and price fluctuation of international crude oil in this period, and predicts the trend of yen exchange rate and international crude oil price in the short or medium term
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