Aggregate and Firm-Level Volatility in the Japanese Economy

Author Name YoungGak KIM (Senshu University) / KWON Hyeog Ug (Faculty Fellow, RIETI)
Creation Date/NO. May 2012 12-E-030
Research Project Research on Productivity Growth in Service Sector
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In this paper, we investigate the volatility of sales at the firm and the aggregate level using the longitudinal dataset of the Financial Statements Statistics of Corporations (FSSC). The main findings are as follows: (1) Firm-level volatility decreased until the mid-1990s but then increased again. (2) Aggregate-level volatility steadily decreased until the mid-1990s and has remained low since. (3) Decomposing the total variance of the growth rate of aggregated sales, we find that the divergence between firm-level and aggregate-level volatility is caused by the drastic decline and subsequent low level of the covariance of sales growth between different firms and the increase in individual firms' volatility.

Published: Kim, Young Gak, and Hyeog Ug Kwon, 2017. "Aggregate and firm-level volatility in the Japanese economy," The Japanese Economic Review, Vol. 68(2), pp. 158-172