Empirical Evidence for Collective Motion of Prices with Macroeconomic Indicators in Japan

28 Pages Posted: 1 Mar 2018

See all articles by Yuichi Kichikawa

Yuichi Kichikawa

Niigata University

Hiroshi Iyetomi

Niigata University

Hideaki Aoyama

RIKEN iTHEMS; Research Institute for Economy, Industry and Trade (RIETI)

Hiroshi Yoshikawa

University of Tokyo - Faculty of Economics

Date Written: June 16, 2017

Abstract

We apply a complex Hilbert principal component analysis (CHPCA) to a set of Japanese economic data collected over the last 32 years, comprising individual price indices of middle classification level (imported goods, producer goods, consumption goods and services), Indices of Business Conditions (leading, coincident, lagging), Yen-Dollar Exchange Rate, Monetary Stock, and Monetary Base. The CHPCA gives a new insight into dynamical linkage of price movements with business cycles and financial conditions. A statistical test identifies two significant eigenmodes with the largest and second largest eigenvalues. The lead-lag relations among domestic prices in the two modes are quite similar, indicating the individual prices behave in a collective way. However, the collective motion of prices is driven differently, that is, by the exchange rate at the upper stream side in the first mode and domestic demand at the lower stream side in the second mode. In contrast, the monetary variables play no important role in the two modes.

Keywords: price changes, business cycles, exchange rate, Hilbert transformation, principal component analysis, dynamical linkage

JEL Classification: E31, D12, C40

Suggested Citation

Kichikawa, Yuichi and Iyetomi, Hiroshi and Aoyama, Hideaki and Yoshikawa, Hiroshi, Empirical Evidence for Collective Motion of Prices with Macroeconomic Indicators in Japan (June 16, 2017). Available at SSRN: https://ssrn.com/abstract=3127339 or http://dx.doi.org/10.2139/ssrn.3127339

Yuichi Kichikawa

Niigata University ( email )

8050 Ikarashi 2 Nocho Nishi Ward
Niigata Prefecture
Niigata, 950-218
Japan

Hiroshi Iyetomi

Niigata University ( email )

8050 Ikarashi-2-cho
Nishi-ku
Niigata, 9502181
Japan

Hideaki Aoyama (Contact Author)

RIKEN iTHEMS ( email )

Wako, Saitama 351-0198
Japan
+81-9019011954 (Phone)

Research Institute for Economy, Industry and Trade (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Hiroshi Yoshikawa

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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