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Product Dynamics and Aggregate Shocks: Evidence from Japanese product and firm level data

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  • Robert DEKLE
  • KAWAKAMI Atsushi
  • KIYOTAKI Nobuhiro
  • MIYAGAWA Tsutomu

Abstract

We examine the effects of shocks to aggregate productivity, foreign output demand, government expenditures, and demand for foreign liquidity on dynamics of products and exports of heterogeneous firms. The framework is motivated by open economy general equilibrium models of Bilbie, Ghironi and Melitz (2012) and Dekle, Jeong and Kiyotaki (2014). We first construct unique firm level data on products and exports from the Census of Manufactures conducted by the Ministry of Economy, Trade and Industry. The data are more disaggregated than comparable U.S. data and available at the annual frequency (while U.S. product level data are only available at five-year intervals), which makes our data more suitable for examining the interaction between the business cycle and firm-product heterogeneity. Our empirical results show that the development of new products is stimulated by improvements in not only firm level productivity but also aggregate productivity. We also find that an increase in foreign demand and a shock to depreciate the home real exchange rate increase product dynamics and exports.

Suggested Citation

  • Robert DEKLE & KAWAKAMI Atsushi & KIYOTAKI Nobuhiro & MIYAGAWA Tsutomu, 2015. "Product Dynamics and Aggregate Shocks: Evidence from Japanese product and firm level data," Discussion papers 15137, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:15137
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    References listed on IDEAS

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    Cited by:

    1. HAMANO Masashige & OKUBO Toshihiro, 2023. "Product Dynamics and Macroeconomic Shocks: Insights from a DSGE model and Japanese data," Discussion papers 23045, Research Institute of Economy, Trade and Industry (RIETI).
    2. MIYAGAWA Tsutomu & EDAMURA Kazuma & KAWAKAMI Atsushi, 2017. "R&D and Product Dynamics," Discussion papers 17101, Research Institute of Economy, Trade and Industry (RIETI).
    3. Atsushi Kawakami, 2017. "Diversified firms and Productivity in Japan," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 13(2), pages 153-166, October.
    4. David Rezza Baqaee, 2018. "Cascading Failures in Production Networks," Econometrica, Econometric Society, vol. 86(5), pages 1819-1838, September.
    5. Masashige Hamano & Keita Oikawa, 2022. "Multi-Product Establishments and Product Dynamics," Working Papers e168, Tokyo Center for Economic Research.
    6. Kozo Kiyota & Yoshinori Kurokawa, 2022. "Factor intensity reversals redux: Feenstra is right!," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 885-914, September.

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