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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 declined considerably during this period, despite little exposure to the US housing market, and exports declined significantly. Motivated by this fact, we construct a multi-sector, multi-region, and small open economy model. Each region has a representative consumer, and regions and sectors are linked through input-output linkages and consumers’ final demand. We measure the export shocks in each region 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 the change in GDP is decomposed within and across regions, as well as within and across sectors.

Suggested Citation

  • Toshihiko MUKOYAMA & Kanato NAKAKUNI & Makoto NIREI, 2024. "Propagation of Export Shocks: The Great Recession in Japan," Discussion papers 24038, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:24038
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    References listed on IDEAS

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    1. repec:hoo:wpaper:e-92-4 is not listed on IDEAS
    2. 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.
    3. repec:fth:stanho:e-92-4 is not listed on IDEAS
    4. 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.
    5. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
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    More about this item

    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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