Research Programs: Macroeconomy and Low Birthrate/Aging Population

East Asian Production Networks, Trade, Exchange Rates, and Global Imbalances

Project Leader/Sub-Leader


THORBECKE, Willem (Senior Fellow)



The Coronavirus pandemic has savaged the world. Not only has the human cost been tragic, but economic dislocation has multiplied. The first part of this research project seeks timely information about how and why the crisis is affecting economies in the world and then attempts to recommend appropriate policy responses. One source of timely and consistent information across countries is sectoral stock prices. These are available daily and provide updated information of investors' forecasts of how individual sectors are faring. Stock prices can be decomposed into changes driven by macroeconomic factors and by sector-specific factors. During the pandemic, macroeconomic factors such as economy-wide slowdowns have hit many sectors. In addition, sector specific influences such as exposure to reductions in human interactions have hit other sectors. This research will use stock return data to try to understand how and why different sectors in Japan and other countries have been affected during the pandemic. It augments this with other data. For instance, it estimates export functions from before the crisis and then uses actual values of explanatory variables to measure how much exports have fallen due to the pandemic. It then uses the results to recommend policy actions to promote recovery.

The research also addresses longer-term issues. Researchers have highlighted the danger of volatile exchange rates emerging. This project investigates how exchange rates affect the pricing behavior, profits, and exports of firms from Japan, Europe, and elsewhere. To do this it uses approaches such as estimating pass-through equations, exchange rate exposure equations, and export equations. It then considers how firms can protect themselves from exchange rate volatility.

Finally, imbalances in the world economy have caused protectionism to explode. This project analyses these imbalances and suggests ways other than trade protection to address them.

January 18, 2021 - June 30, 2023

(During the research project period, the research activity period is set from January 18, 2021 to December 31, 2022, and the data usage reporting period is set from January 1, 2023 to June 30, 2023.)

Major Research Results


RIETI Discussion Papers