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

48 Pages Posted: 12 Jan 2016  

Robert Dekle

University of Southern California - Department of Economics

Atsushi Kawakami

Teikyo University

Nobuhiro Kiyotaki

Princeton University - Department of Economics

Tsutomu Miyagawa

Gakushuin University

Date Written: November 2015

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 business cycles 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 a rise in foreign demand and a shock to depreciate the home real exchange rate increase product dynamics and exports.

Keywords: Product Adding, Product Dropping, Aggregate and Idiosyncratic Productivity Shocks, Foreign Demand Shocks, Exports, Real Exchange Rates.

Suggested Citation

Dekle, Robert and Kawakami, Atsushi and Kiyotaki, Nobuhiro and Miyagawa, Tsutomu, Product Dynamics and Aggregate Shocks: Evidence from Japanese Product and Firm Level Data (November 2015). USC-INET Research Paper No. 16-01. Available at SSRN: https://ssrn.com/abstract=2712529 or http://dx.doi.org/10.2139/ssrn.2712529

Robert Dekle (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
213-740-8335 (Phone)

Atsushi Kawakami

Teikyo University ( email )

Hachiojishi, Tokyo, 192-0395
United States

Nobuhiro Kiyotaki

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Tsutomu Miyagawa

Gakushuin University ( email )

1-5-1 Mejiro
Toshima-ku Tokyo 171-8588
United States

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