65 shocks TABLE 7 Sacrifice Ratios
(Output-Inflation Volatility Ratios) Implied by the Model Under Different Exchange Rate Regimes in the Models with and without Financial Frictions Floating Exchange Rates Type of Shock [rho](.
5% and the average sacrifice ratio has increased from about 1.
This paper's empirical method allows us to measure the sacrifice ratio as the costs of a deliberate disinflation policy in contrast to, for example, the output costs of a series of negative cost push shocks.
This article finds a negative relationship between the past inflation history and the sacrifice ratio from episode-specific analysis and helps to reconcile the previously inconsistent findings.
We show that the sacrifice ratio depends on inflation history in Section IV.
Drawing inferences from data is always difficult, but our findings suggest that the measured declines in inflation persistence and the slope of the Phillips curve are too small to suggest that the sacrifice ratio
7) However, the total output loss and the sacrifice ratio can be shown to be precisely the same.
As in the case with a semicredible two-step disinflation, the sacrifice ratio with a semicredible three-step disinflation is again precisely the same as it is with the cold-turkey disinflation.
Economists often loosely refer to the sacrifice ratio - [([Y.
However, imagine a sacrifice ratio from some exogenous shock, such as an oil price hike, that both reduces output and induces the monetary authority initially to raise money growth in order to cushion the shock and then to slow the rate of money growth in order to reduce inflation.
The construction of the sacrifice ratio follows Ball's (1994) method.
The trend-gap method also allows calculation of a separate sacrifice ratio for each disinflation.