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Product Dynamics and Aggregate Shocks: Evidence from Japanese Product and Firm Level Data

Author

Listed:
  • Robert Dekle

    (University of Southern California)

  • Atsushi Kawakami

    (Teikyo University)

  • Nobuhiro Kiyotaki

    (Princeton University)

  • Tsutomu Miyagawa

    (Gakushuin University)

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 Japanese Manufacturing Census. The data are more disaggregated than comparable U.S. data and available at the annual frequency (while US 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 & Atsushi Kawakami & Nobuhiro Kiyotaki & Tsutomu Miyagawa, 2015. "Product Dynamics and Aggregate Shocks: Evidence from Japanese Product and Firm Level Data," Working Papers 2015-3, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2015-3
    as

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    File URL: http://www.princeton.edu/~kiyotaki/papers/DKKM-Oct.28-2015.pdf
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    References listed on IDEAS

    as
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    3. Florin O. Bilbiie & Fabio Ghironi & Marc J. Melitz, 2012. "Endogenous Entry, Product Variety, and Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 120(2), pages 304-345.
    4. Arpita Chatterjee & Rafael Dix-Carneiro & Jade Vichyanond, 2013. "Multi-product Firms and Exchange Rate Fluctuations," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 77-110, May.
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    More about this item

    Keywords

    Add New Products; Drop Existing Products; Aggregate and Idiosyncratic Shocks to Productivity; Foreign Demand Shock; Exports; Real Exchange Rates;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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