Sacrifice Ratios for Euro Area Countries New Evidence on the Costs of Price Stability

Belke, Ansgar; Böing, Tobias

doi:10.2139/ssrn.2565729

Cited by 3 publications

(4 citation statements)

References 23 publications

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“…Filardo (1998) introduced non-linearity in the Phillips curve by assuming different slope coefficients of the output gap in different phases of the economy. Other extensions include estimating the impact of international competitiveness and cross country aspects (Belke and Boeing, 2014). Ball (1994) introduced an episode-specific method to measure SR.…”

Section: Literature Reviewmentioning

confidence: 99%

Correlated Shocks, Hysteresis, and the Sacrifice Ratio: Evidence from India

Goyal

Goel²

2019

Emerging Markets Finance and Trade

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In an emerging market subject to frequent shocks output sacrifice from disinflation depends not only on the Phillips curve slope but also on shifts in demand and supply. Introducing shocks and correlations between shocks in a Kalman filter based estimation, the slope flattens, correlation between permanent output shocks (supply) and output gap (demand) shocks is negative and a new decomposition of output between trend and output gap shocks is obtained. The flat supply curve is robust to parameter changes, and business cycle turning points are tracked well, but the decomposition varies. More stable inflation expectation and rise in forward-looking behaviour increases volatility of trend growth and reduces the output gap. Inflation targeting had such effects in India. Estimated sacrifice ratio varies with the period and method, but it rises to 6.7 over 2011-17 if such hysteresis is included. Simultaneous equation estimation corroborates the results. In the estimation period, inflation targeting affected expectations but not inflation.

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Section: Literature Reviewmentioning

confidence: 99%

Correlated Shocks, Hysteresis, and the Sacrifice Ratio: Evidence from India

Goyal

Goel²

2019

Emerging Markets Finance and Trade

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“…Cecchetti and Rich (2001) take Cecchetti’s suggestion to estimate the sacrifice ratio for USA data using three different structural VAR models. In addition, Andersen and Wascher (1999), Durand, et al (2008), Belke and Boing (2014) and Sethi and Acharya (2017a) apply the structural VAR model in the estimation of the sacrifice ratio.…”

Section: Literature Reviewmentioning

confidence: 99%

Can a Disinflationary Policy Have a Differential Impact on Sectoral Output? A Look at Sacrifice Ratios in OECD and Non-OECD Countries

Sethi

Wong²,

Acharya

2018

Margin: The Journal of Applied Economic Research

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This article examines the sectoral impact of disinflationary monetary policy by calculating the sacrifice ratios for several Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. Sacrifice ratios calculated through the episode method reveal that disinflationary monetary policy has a differential impact across three sectors in both OECD and non-OECD countries. Of the three sectors, the industry and service sectors show significant output loss due to a tight monetary policy in OECD and non-OECD countries. But the agricultural sector shows a differential impact of disinflation policy: It shows a negative sacrifice ratio in OECD countries indicating that output growth is insignificantly affected by a tight monetary policy while non-OECD countries yield positive sacrifice ratios, suggesting that the output loss is significant. Further, it is observed that sacrifice ratios calculated from aggregate data are different from ratios calculated from sectoral data. JEL Classification: E52, E58, C14, O50

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“…According to the expectations-augmented Phillips curve, actual inflation, , exceeds expected inflation, , if the actual unemployment rate, u, is less than the natural rate, u; actual inflation is less than expected inflation if the unemployment rate exceeds the natural Based on historical disinflationary episodes experienced by some countries. Cecchetti & Rich (2001); Belke & Böing (2014) separately applied structural vector autoregressive technique and found that most countries had sacrifice ratios of between -1 and 2 percent of real GDP for a reduction in inflation of one percentage point. Dholakia (2014) estimated the sacrifice ratio and cost of inflation for the Indian economy.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Again, the inflation rate was significantly reduced by 76.5% during the periods 1996-2000, and 69.7% for the periods 2006(CBN Statistical Bulletin, 2009, 2012.These inflation reductions impose a cost to the economy in terms of output lost. Several studies (Belke & Böing, 2014;Dramani & Thiam, 2012;Daniels & VanHoose, 2004;Cecchetti & Rich, 2001;Muñoz-Torres, 2005;interalia) have succulently demonstrate that the sacrifice ratio differs considerably among countries, yet this is unknown for Nigeria.As further enunciated by Daniels & VanHoose (2004) and Dramani & Thiam (2012), it is possible to reduce the size of the sacrifice ratio without a corresponding increase in the rate of inflation. This has made this study apt to ascertain what Nigeria's sacrifice ratio could be after many successful inflation reductions over the years.…”

Section: Introductionmentioning

confidence: 99%

Analysis of The Impact of Inflation Reduction on Output and Unemployment in Nigeria

Edeme

Kalu

Emecheta

et al. 2018

JESP

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It has been enunciated that it is possible to reduce the size of the sacrifice ratio in an economy without a corresponding increase in the rate of inflation. Besides, for the Nigerian economy, there are issues relating to the inflationoutput relationship, among which is how inflation inertia impacts on output and unemployment. It is therefore apt to ascertain what Nigeria's sacrifice ratio could be after many successful inflation reductions over the years. Adopting the Instrumental Variables Generalized Method of Moments (IV-GMM) technique and using data from1970-2015, the findings suggest that inflation inertia has a significant negative impact on the actual rate of inflation in Nigeria. It was also revealed that the percentage of a year's real GDP that must be forgone to reduce inflation by 1 percent in Nigeria is 5.1 while 53.6 percent of output was sacrificed in 1982. Equivalently, a sacrifice of 26.6 percent of cyclical unemployment was made in the same year; while the highest percentage of GDP was sacrificed in 1990 and the lowest in 2007.

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Sacrifice Ratios for Euro Area Countries New Evidence on the Costs of Price Stability

Cited by 3 publications

References 23 publications

Correlated Shocks, Hysteresis, and the Sacrifice Ratio: Evidence from India

Correlated Shocks, Hysteresis, and the Sacrifice Ratio: Evidence from India

Can a Disinflationary Policy Have a Differential Impact on Sectoral Output? A Look at Sacrifice Ratios in OECD and Non-OECD Countries

Analysis of The Impact of Inflation Reduction on Output and Unemployment in Nigeria

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