Interindustry linkages of prices-Analysis of Japan's deflation

Yuichi Kichikawa; Hiroshi Iyetomi; Hideaki Aoyama; Yoshi Fujiwara; Hiroshi Yoshikawa

doi:10.1371/journal.pone.0228026

Interindustry linkages of prices-Analysis of Japan's deflation

PLoS One. 2020 Feb 13;15(2):e0228026. doi: 10.1371/journal.pone.0228026. eCollection 2020.

Authors

Yuichi Kichikawa¹, Hiroshi Iyetomi², Hideaki Aoyama^{3

4

5}, Yoshi Fujiwara⁵, Hiroshi Yoshikawa^{4

6}

Affiliations

¹ Faculty of Science, Niigata University, Niigata, Japan.
² Department of Mathematics, Niigata University, Niigata, Japan.
³ GSAIS, Kyoto University, Kyoto, Japan.
⁴ RIETI, Tokyo, Japan.
⁵ Graduate School of Simulations, University of Hyogo, Kobe, Japan.
⁶ Faculty of Economics, Rissho University, Tokyo, Japan.

Abstract

The interactions among macroprices with leads and lags play a significant role in explaining the behavior of an aggregate price index. Thus, to understand inflation and deflation, it is essential to explore the mechanism according to which these macroprices interact with each other. On the basis of a new method, we show that, irrespective of the sources of shocks, a robust flow of changes occurs in domestic prices from upstream to downstream. Moreover, we demonstrate that macroprices change in clusters, and we identify these clusters. Firms are not symmetric. Overall, our analysis suggests that the inertia arising from input/output linkages in production explains the behavior of aggregate prices.

Publication types

Research Support, Non-U.S. Gov't

MeSH terms

Commerce*
Industry / economics*
Inflation, Economic*
Japan
Models, Theoretical
Principal Component Analysis
Time Factors

Grants and funding

This study was supported in part by the Project “Large-scale Simulation and Analysis of Economic Network for Macro Prudential Policy” undertaken at Research Institute of Economy, Trade and Industry (RIETI), MEXT as Exploratory Challenges on Post-K computer (Studies of Multi-level Spatiotemporal Simulation of Socioeconomic Phenomena), Grant-in-Aid for Scientific Research (KAKENHI) by JSPS Grant Numbers 25400393, 17H02041 and the Kyoto University Supporting Program for Interaction-based Initiative Team Studies: SPIRITS, as part of the Program for Promoting the Enhancement of Research Universities, MEXT, JAPAN.