Research Programs: Raising Industrial and Firm Productivity

Decomposition of Economic Fluctuations for Supply and Demand Shocks

Project Leader/Sub-Leader


KONISHI Yoko (Fellow)



Since the burst of the bubble economy in the early 1990s, the growth rate of the Japanese economy has remained stagnant, and productivity is continuing to decline. A number of researchers recently investigated what occurred during the period. The government is also attempting to answer the question in the quest for an effective policy to increase the gross domestic product (GDP) growth. In empirical works, total factor productivity (TFP) is commonly used as a measure of productivity. Specifically, we apply the Cobb-Douglas/Translog production function and the ordinary least squares (OLS) method. However, some researchers have pointed out that endogeneity problems can only exist in OLS and have also estimated that TFP includes the demand shock through the price of products. These problems may lead to incorrect implications when attempting to find the reason(s) for fluctuations in the economy using the estimated TFP. In this project, we look to decompose the effects of productivity and demand shock on economic growth. We proposed a method to decompose TFP-type quantity into demand, supply, and other shocks in our previous project. From this year, we will focus on measuring the productivity of the service industries.

April 15, 2013 - March 31, 2015

Major Research Results


RIETI Discussion Papers


RIETI Discussion Papers