Fluctuation-dissipation theory of input-output interindustrial relations

Area of Science:

• Economic Physics
• Macroeconomics

Background:

• Interindustrial relations are complex and macroscopic analysis is needed.
• Previous work identified intrinsic business cycles using two dominant eigenmodes.

Purpose of the Study:

• To apply fluctuation-dissipation theory to macroscopic interindustrial relations.
• To quantitatively analyze the relationship between final and intermediate goods production.
• To investigate economic stimuli from the global crisis on the Japanese economy.

Main Methods:

• Utilizing fluctuation-dissipation theory and random matrix theory.
• Analyzing eigenvalue decomposition of the correlation matrix of industrial production indices (IIP).
• Employing a linear response framework and analyzing residuals of moving-average fluctuations.

Main Results:

• Identified two dominant eigenmodes in Japanese IIP data, confirming intrinsic business cycles.
• Constructed a correlation matrix from these modes, revealing genuine interindustrial correlations.
• Quantitatively discussed the relationship between final demand shipments and intermediate goods production.

Conclusions:

• Fluctuation-dissipation theory is applicable to economic systems, even those far from equilibrium.
• The methods provide a statistically meaningful way to understand interindustrial dynamics and external economic shocks.