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The Impact of the Great East Japan Earthquake on Commodity Prices: New Evidence from High-Frequency Scanner Data

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  • Abe, Naohito
  • Moriguchi, Chiaki
  • Inakura, Noriko

Abstract

Using high-frequency point-of-sales data, we investigate the impact of the Great East Japan Earthquake on prices. In contrast to the official Consumer Price Index that shows little impact, our price index based on scanner data reveals a modest yet notable increase in within-store commodity prices following the disaster in eastern Japan. We find that the disaster had a large and lasting effect in reducing the frequency and magnitude of bargain sales at retail stores especially in Tokyo. However, under severe commodity shortages, the standard index based on within-store same-commodity price changes may not capture the actual changes in the cost of living. To overcome this problem, we propose two alternative price indices based on (1) commodity price without distinguishing stores and (2) unit price without distinguishing commodities (i.e., brands) within the same category. Focusing on the food categories for which the disaster induced large excess demand, we find that rise in the alternative price indices was considerably greater than that in the standard price index. We further show that observed price elasticity between stores (as well as between brands) declined significantly after the disaster, indicating that, in the face of commodity shortages, the same commodity sold at different stores (or even different brands within the same category) became closer substitutes for consumers.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/26495/1/ifd_wp012.pdf
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Bibliographic Info

Paper provided by Research Center for Price Dynamics, Institute of Economic Research, Hitotsubashi University in its series Research Center for Price Dynamics Working Paper Series with number 12.

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Length: 35 p.
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:hit:rcpdwp:12

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Keywords: natural disaster; commodity shortages; consumer price index; scanner data;

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  1. Jessie Handbury & Tsutomu Watanabe & David E. Weinstein, 2013. "How Much Do Official Price Indexes Tell Us about Inflation?," NBER Working Papers 19504, National Bureau of Economic Research, Inc.
  2. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(4), pages 1415-1464, November.
  3. Hajime Tomura, 2013. "Investment Horizon and Repo in the Over-the-Counter Market," UTokyo Price Project Working Paper Series, University of Tokyo, Graduate School of Economics 013, University of Tokyo, Graduate School of Economics.
  4. Shiratsuka, Shigenori, 1999. "Measurement Errors in the Japanese Consumer Price Index," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(3), pages 69-102, December.
  5. Nao Sudo & Kozo Ueda & Kota Watanabe, 2013. "Micro Price Dynamics during Japan's Lost Decades," CAMA Working Papers 2013-63, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  6. Alberto Cavallo & Eduardo Cavallo & Roberto Rigobon, 2013. "Prices and Supply Disruptions during Natural Disasters," NBER Working Papers 19474, National Bureau of Economic Research, Inc.
  7. Virgiliu Midrigan, 2011. "Menu Costs, Multiproduct Firms, and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 79(4), pages 1139-1180, 07.
  8. Shigenori Shiratsuka, 1999. "Measurement errors in Japanese Consumer Price Index," Working Paper Series, Federal Reserve Bank of Chicago WP-99-2, Federal Reserve Bank of Chicago.
  9. Diewert, Erwin & Fox, Kevin J. & Ivancic, Lorraine, 2009. "Scanner Data, Time Aggregation and the Construction of Price Indexes," Economics working papers, Vancouver School of Economics erwin_diewert-2009-48, Vancouver School of Economics, revised 22 Sep 2009.
  10. Abe, Naohito & Tonogi, Akiyuki, 2010. "Micro and macro price dynamics in daily data," Journal of Monetary Economics, Elsevier, Elsevier, vol. 57(6), pages 716-728, September.
  11. Abe, Naohito & Moriguchi, Chiaki & Inakura, Noriko, 2012. "The Great East Japan Earthquake and its Short-run Effects on Household Purchasing Behavior," Research Center for Price Dynamics Working Paper Series, Research Center for Price Dynamics, Institute of Economic Research, Hitotsubashi University 2, Research Center for Price Dynamics, Institute of Economic Research, Hitotsubashi University.
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