Abstract
:In this study, we investigate the effects of output forecast shocks on the Japanese economy, using historical decomposition based on a standard time-series analysis. The novelty of this study is that it incorporates the Ministry of Economy, Trade, and Industry (METI) indices of production forecasts a time series of firms’ one-month-ahead output forecasts, in its analysis of output data. This direct observation of forecasts facilitates the identification of expectation shocks. Our analysis reveals that whereas the output slowdown after the 2008 global financial crisis was caused mainly by shocks to expectations, the output slump following the 2011 earthquake in East Japan resulted from shocks to output.
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