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Disinflation in a DSGE Perspective: Sacrifice Ratio or Welfare Gain Ratio?

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  • Guido Ascari

    ()
    (Department of Economics and Quantitative Methods, University of Pavia)

  • Tiziano Ropele

    ()
    (Bank of Italy)

Abstract

When used to examine disinflation monetary policies, the current workhorse dynamic stochastic general equilibrium model of business cycle fluctuations is able to quantitatively account for the main stylized facts in terms of recessionary effects and sacrifice ratio. We complement the transitional analysis of the short-run costs with a rigorous welfare evaluation and show that, despite the long-lasting economic downturn, disinflation entails non-zero overall welfare gains.

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File URL: http://economia.unipv.it/docs/dipeco/quad/ps/RePEc/pav/wpaper/q111.pdf
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Bibliographic Info

Paper provided by University of Pavia, Department of Economics and Quantitative Methods in its series Quaderni di Dipartimento with number 111.

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Length: 31 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:pav:wpaper:111

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Keywords: Disinflation; Sacrifice ratio; Non-linearities;

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Cited by:
  1. José A Carrasco-Gallego & Margarita Rubio, 2013. "Macroprudential Measures, Housing Markets and Monetary Policy," Discussion Papers 2013/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  2. Rubio, Margarita, 2014. "Housing-market heterogeneity in a monetary union," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 163-184.
  3. José A Carrasco-Gallego & Margarita Rubio, 2013. "Macroprudential and Monetary Policies: Implications for Financial Stability and Welfare," Discussion Papers 2013/04, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

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