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The New Keynesian Model and Sacrifice Ratios: Some Measurement Issues

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  • André Lunardelli
  • Marcio Issao Nakane

Abstract

There is some confusion in the literature about how to calculate sacrifice ratios (SRs), and we show that correcting for this problem implies that the way computed by Ascari and Ropele (2012) generates values four times larger than the way reported by most of the empirical studies. Therefore, contrary to their claim, their baseline simulations with the medium-scale New Keynesian model with past inflation indexation do not generate realistic sacrifice ratios, and simulations with plausible but less frequently used parameters can only reach the very low end of the range of the estimates obtained in the empirical studies.

Suggested Citation

  • André Lunardelli & Marcio Issao Nakane, 2019. "The New Keynesian Model and Sacrifice Ratios: Some Measurement Issues," Working Papers, Department of Economics 2019_18, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2019wpecon18
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    References listed on IDEAS

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    More about this item

    Keywords

    Disinflation; sacrifice ratio; inflation persistence.;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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