Price and Output Adjustment in Japanese Manufacturing, Issue 2878
National Bureau of Economic Research, 1989 - Foreign exchange - 26 pages
This paper investigates the importance of markup behavior in Japanese manufacturing. According to the evidence presented, Japanese firms have varied the markups of prices over marginal costs in order to limit the effects of exchange rate changes on output. This behavior is quite different from that found in U.S. manufacturing where output and employment have borne the main impact of recent exchange rate changes. The paper examines markups in nine sectors of manufacturing which are major producers of exports. In all nine sectors, Japanese prices prove to be highly sensitive to foreign prices and exchange rates as well as to more traditional demand and supply variables. The paper shows that variable markups rather than high price elasticities account for this price behavior, since output is relatively insensitive to prices or exchange rates.
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ADJUSTMENT IN JAPANESE Bank of Japan Bureau of Economic Cyclical movements demand and cost demand curve demand equations distributed lags domestic and export domestic currency domestic market domestic or export domestic prices Economic Research elasticity of demand electrical machinery estimated exchange rate changes export prices expressed expressed in yen foreign prices High demand elasticities independent variable influence Japanese output Japanese prices Jonathan Skinner less the wage marginal cost markup behavior markups of prices nine sectors OECD order condition output and employment price and output price changes price elasticity price for sector price indexes price series price with respect prices of exports prices over marginal pricing to market Producer price index productivity growth real exchange rate seasonal dummy variables sectoral real exchange sectors of Japanese sectors of manufacturing sensitive to foreign serial correlation St Qit statistically significant trend U.S. manufacturing variable markups wage in manufacturing William H yen prices yen vary