Price and Output Adjustment in Japanese Manufacturing

28 Pages Posted: 14 Jan 2001

See all articles by William H. Branson

William H. Branson

Princeton University - Woodrow Wilson School of Public and International Affairs; National Bureau of Economic Research (NBER)

Richard C. Marston

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Date Written: March 1989

Abstract

This paper investigates the importance of markup behavior in Japanese manufacturing. According to the evidence presented, Japanese firms have varied the markups of prices over marginal costs in order to limit the effects of exchange rate changes on output. This behavior is quite different from that found in U.S. manufacturing where output and employment have borne the main impact of recent exchange rate changes. The paper examines markups in nine sectors of manufacturing which are major producers of exports. In all nine sectors, Japanese prices prove to be highly sensitive to foreign prices and exchange rates as well as to more traditional demand and supply variables. The paper shows that variable markups rather than high price elasticities account for this price behavior, since output is relatively insensitive to prices or exchange rates.

Suggested Citation

Branson, William H. and Marston, Richard C., Price and Output Adjustment in Japanese Manufacturing (March 1989). NBER Working Paper No. w2878. Available at SSRN: https://ssrn.com/abstract=246868

William H. Branson (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

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Richard C. Marston

University of Pennsylvania - Finance Department ( email )

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215-573-2242 (Fax)

National Bureau of Economic Research (NBER)

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United States

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