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

Dekle, Robert; Kawakami, Atsushi; Kitoyaki, Nobuhiro; Miyagawa, Tsutomu

Conceptually linking product adding and dropping to business cycles goes back to at least Shumpeter. We examine the effects of shocks to aggregate productivity, foreign demand, government expenditures, and demand for foreign liquidity on the dynamics of products of heterogeneous firms. Our structural empirical specifications connecting macroeconomic shocks to product dynamics are based on a neoclassical dynamic general equilibrium model (Dekle, Kiyotaki, and Jeong, 2014). We first construct unique firm level data on products and exports from the Japanese Census of Manufactures. The data are more disaggregated than comparable U.S. data and available at the annual frequency (while U.S. 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 dynamics. We find that positive macroeconomic shocks in total factor productivity, government demand, and real exchange rates strongly increase the number of products.

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More About This Work

Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 354
Published Here
August 24, 2016