Interindustry linkages of prices-Analysis of Japan's deflation

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...

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Bibliographic Details
Published in:PloS one 2020-02, Vol.15 (2), p.e0228026-e0228026
Main Authors: Kichikawa, Yuichi, Iyetomi, Hiroshi, Aoyama, Hideaki, Fujiwara, Yoshi, Yoshikawa, Hiroshi
Format: Article
Language:English
Subjects:
Aggregates
Central banks
Clusters
Commerce
Consumer Price Index
Deflation
Engineering and Technology
Fujiwara, Hiroshi
Industry - economics
Inflation
Inflation, Economic
Japan
Linkages
Macroeconomics
Methods
Models, Theoretical
Monetary policy
Phillips curve
Physical Sciences
Price indexes
Pricing
Principal Component Analysis
Principal components analysis
Raw materials
Research and Analysis Methods
Social Sciences
Time Factors
Wage & price controls
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Summary: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.
ISSN:1932-6203
1932-6203
DOI:10.1371/journal.pone.0228026