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Propagation of Export Shocks: The Great Recession in Japan

Author

Listed:
  • Toshihiko Mukoyama

  • Kanato Nakakuni

  • Makoto Nirei

Abstract

This study analyzes the Japanese economy during the Great Recession period (2007-2009). The Japanese GDP dropped significantly during this period, despite limited exposure to the US housing market, and exports also declined sharply. Motivated by this fact, we construct a multi-sector, multi-region small open economy model. Each region has a representative consumer, and regions and sectors are linked through inter-regional input-output tables and consumers’ final demand. We measure the export shocks in each region-sector using trade statistics. Using our model, we quantitatively evaluate how the decline in export demand propagates throughout the country. We find that export shocks account for a significant portion of the GDP decline in many regions. To inspect the mechanism, we conduct counterfactual exercises in which we examine the change in GDP resulting from an export shock in a specific industry-region. The propagation is decomposed within and across regions, as well as within and across sectors.

Suggested Citation

  • Toshihiko Mukoyama & Kanato Nakakuni & Makoto Nirei, 2025. "Propagation of Export Shocks: The Great Recession in Japan," CRC TR 224 Discussion Paper Series crctr224_2025_711, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_711
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    References listed on IDEAS

    as
    1. Christian vom Lehn & Thomas Winberry, 2022. "The Investment Network, Sectoral Comovement, and the Changing U.S. Business Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(1), pages 387-433.
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    3. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
    4. Lorenzo Caliendo & Fernando Parro & Esteban Rossi-Hansberg & Pierre-Daniel Sarte, 2018. "The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2042-2096.
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    Keywords

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    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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