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Propagation of Export Shocks: The Great Recession in Japan

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  • MUKOYAMA Toshihiko
  • NAKAKUNI Kanato
  • NIREI Makoto

Abstract

This study analyzes the Japanese economy during the Great Recession period (2007-2009). The Japanese GDP declined considerably during this period, despite little exposure to the US housing market, and exports declined significantly. Motivated by this fact, we construct a multi-sector, multi-region, and small open economy model. Each region has a representative consumer, and regions and sectors are linked through input-output linkages and consumers’ final demand. We measure the export shocks in each region using trade statistics. Using our model, we quantitatively evaluate how the decline in export demand propagates throughout the country. We find that export shocks account for a significant portion of the GDP decline in many regions. To inspect the mechanism, we conduct counterfactual exercises in which the change in GDP is decomposed within and across regions, as well as within and across sectors.

Suggested Citation

  • MUKOYAMA Toshihiko & NAKAKUNI Kanato & NIREI Makoto, 2024. "Propagation of Export Shocks: The Great Recession in Japan," Discussion papers 24038, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:24038
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    1. repec:hoo:wpaper:e-92-4 is not listed on IDEAS
    2. Lorenzo Caliendo & Fernando Parro & Esteban Rossi-Hansberg & Pierre-Daniel Sarte, 2018. "The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2042-2096.
    3. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
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