Economic consequences of follow-up disasters: lessons from the 2011 Great East Japan Earthquake

Anastasios Evgenidis, Masashige Hamano and Wessel Vermeulen

No 2111, Working Papers from Waseda University, Faculty of Political Science and Economics

Abstract: We apply a Bayesian Panel VAR (BPVAR) and DSGE approach to study the regional effects of the 2011 Great East Japan Earthquake. We disentangle the persistent fall in electricity supply following the Fukushima accident, from the immediate but more temporary production shock attributable to the natural disaster. Specifically, we estimate the contribution of the electricity fall on the regions economic recovery. First, we estimate a BPVAR with regional-level data on industrial production, prices, and trade, to obtain impulse responses of the natural disaster shock. We find that all regions experienced a strong and persistent decline in trade, and long-lasting disruptions on production. Inflationary pressures were strong but short-lived. Second, we present a DSGE model that can capture key observations from this empirical model, and provide theoretical impulse response functions that distinguish the immediate production shock, from the persistent electricity supply shock. Thirdly, in line with the predictions from the theoretical model, counterfactual analysis via conditional forecasts based on our BPVAR reveals that the Japanese regional economies, particularly the hit regions, did experience a loss in production and trade due to the persistent fall in electricity supply.

Keywords: Social Choice natural disasters; Bayesian Panel VAR; DSGE; regional spill-overs; counterfactual analysis (search for similar items in EconPapers)
JEL-codes: E3 E6 Q54 R1 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2021-06
New Economics Papers: this item is included in nep-dge, nep-env, nep-isf, nep-mac and nep-ure
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Economic consequences of follow-up disasters: Lessons from the 2011 Great East Japan Earthquake (2021)
Working Paper: Economic consequences of follow-up disasters: lessons from the 2011 Great East Japan Earthquake (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wap:wpaper:2111

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