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Aggregate Implications of Changing Industrial Trends in Japan

Author

Listed:
  • Toyoichiro Shirota

    (Aoyama Gakuin University)

  • Satoshi Tsuchida

    (Bank of Japan)

Abstract

This study examines the extent to which the long-term declining trend in Japan's GDP growth rate is attributable to factors common to all the industries or those specific to individual industries. By applying Japan's 1958-2019 data to a multi-industry network model, we obtained the following results. First, common factors explain approximately 60% of the variation in Japan's long-term GDP growth rate. This result contrasts to that in the US: common factors explain only about 30% of the secular trend in US GDP growth. Second, however, the impact of industry-specific factors is non-negligible. In particular, machinery-industry-specific factors explain much of the low growth in the past 20 years. Finally, the spillover effects from individual industries to the aggregate GDP depend on the role of each industry in the production network, and in Japan, the influence of investment-related industries such as the machinery industries and construction is substantial.

Suggested Citation

  • Toyoichiro Shirota & Satoshi Tsuchida, 2024. "Aggregate Implications of Changing Industrial Trends in Japan," Bank of Japan Working Paper Series 24-E-2, Bank of Japan.
    • Handle: RePEc:boj:bojwps:wp24e02
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    More about this item

    Keywords

    Trend growth; Industrial linkages; Production network; Growth accounting;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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