Stabilized Business Cycles with Increased Output Volatility at High Frequencies

Takeshi Kimura and Kyosuke Shiotani
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Kyosuke Shiotani: Bank of Japan

No 07-E-23, Bank of Japan Working Paper Series from Bank of Japan

Abstract: In Japan, like many other industrialized countries, output volatility declined dramatically in the 1980s. In order to investigate the cause of this decline, we decompose the variance of output growth by frequency. Our important findings are: (1) The total variance of output growth decreased, which resulted from a reduction in the volatility at business-cycle frequencies; (2) At business-cycle frequencies, the variance of production fell by a larger percentage than did the variance of sales; and (3) In stark contrast, at high frequencies, the variance of production increased, while the variance of sales decreased. These features of production at different frequencies cannot be explained by changes in the sales process and cost-shock process. Instead, improved business practices----such as the adoption of the just-in-time technique----played a direct role in stabilizing the business cycles, while increasing output volatility at high frequencies.

Keywords: Output volatility; Inventories; Business cycle (search for similar items in EconPapers)
JEL-codes: E22 E23 E32 (search for similar items in EconPapers)
Date: 2007-10
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Related works:
Journal Article: Stabilized business cycles with increased output volatility at high frequencies (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:boj:bojwps:07-e-23

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