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

Author

Listed:
  • 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.

Suggested Citation

  • Abe, Naohito & Moriguchi, Chiaki & Inakura, Noriko, 2014. "The Impact of the Great East Japan Earthquake on Commodity Prices: New Evidence from High-Frequency Scanner Data," Research Center for Price Dynamics Working Paper Series 12, Research Center for Price Dynamics, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:rcpdwp:12
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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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    References listed on IDEAS

    as
    1. Ivancic, Lorraine & Erwin Diewert, W. & Fox, Kevin J., 2011. "Scanner data, time aggregation and the construction of price indexes," Journal of Econometrics, Elsevier, vol. 161(1), pages 24-35, March.
    2. 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.
    3. 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 2, Research Center for Price Dynamics, Institute of Economic Research, Hitotsubashi University.
    4. Virgiliu Midrigan, 2011. "Menu Costs, Multiproduct Firms, and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(4), pages 1139-1180, July.
    5. Alberto Cavallo & Eduardo Cavallo & Roberto Rigobon, 2014. "Prices and Supply Disruptions during Natural Disasters," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S2), pages 449-471, November.
    6. Shigenori Shiratsuka, 1999. "Measurement errors in Japanese Consumer Price Index," Working Paper Series WP-99-2, Federal Reserve Bank of Chicago.
    7. Nao Sudo & Kozo Ueda & Kota Watanabe, 2014. "Micro Price Dynamics during Japan's Lost Decades," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(1), pages 44-64, January.
    8. Hajime Tomura, 2016. "Investment Horizon and Repo in the Over‐the‐Counter Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(1), pages 145-164, February.
    9. Abe, Naohito & Tonogi, Akiyuki, 2010. "Micro and macro price dynamics in daily data," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 716-728, September.
    10. Shiratsuka, Shigenori, 1999. "Measurement Errors in the Japanese Consumer Price Index," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(3), pages 69-102, December.
    11. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, Oxford University Press, vol. 123(4), pages 1415-1464.
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    Cited by:

    1. Saki Sugano, 2016. "The Well-Being of Elderly Survivors after Natural Disasters: Measuring the Impact of the Great East Japan Earthquake," The Japanese Economic Review, Japanese Economic Association, vol. 67(2), pages 211-229, June.

    More about this item

    Keywords

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

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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