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Inflation History And The Sacrifice Ratio: Episode-Specific Evidence

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  • TAKASHI SENDA
  • JULIE K SMITH

Abstract

"This article examines whether episode-specific analysis can show a negative relationship between inflation and the slope of the Phillips curve that has been found in cross-country analysis. While the relationship between inflation and the Phillips curve slope is widely accepted from cross-country analysis, it has remained unproven in previous episode-specific studies. By defining inflation history as a weighted average of past inflation, this study finds a negative effect of inflation history on the sacrifice ratio, which is what is expected from the cross-country analysis. The negative relationship does not disappear even after including other conventional determinants of the sacrifice ratio. "("JEL "E52, E31) Copyright (c) 2008 Western Economic Association International.

Suggested Citation

  • Takashi Senda & Julie K Smith, 2008. "Inflation History And The Sacrifice Ratio: Episode-Specific Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 26(3), pages 409-419, July.
  • Handle: RePEc:bla:coecpo:v:26:y:2008:i:3:p:409-419
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    References listed on IDEAS

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    1. Boschen, John F. & Weise, Charles L., 2001. "The Ex Ante Credibility of Disinflation Policy and the Cost of Reducing Inflation," Journal of Macroeconomics, Elsevier, vol. 23(3), pages 323-347, July.
    2. Marc Hofstetter, 2007. "Disinflating from moderate inflation in Latin America and Caribbean," COYUNTURA ECONÓMICA, FEDESARROLLO, June.
    3. Lawrence Huiyan Zhang, 2005. "Sacrifice Ratios with Long-Lived Effects," International Finance, Wiley Blackwell, vol. 8(2), pages 231-262, August.
    4. Bonomo, Marco & Carvalho, Carlos, 2004. "Endogenous Time-Dependent Rules and Inflation Inertia," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1015-1041, December.
    5. Kiley, Michael T, 2000. "Endogenous Price Stickiness and Business Cycle Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 28-53, February.
    6. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 869-903.
    7. Tsiddon, Daniel, 1991. "On the Stubbornness of Sticky Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 69-75, February.
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    Citations

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    Cited by:

    1. Nicolás De Roux & Marc Hofstetter, 2014. "Sacrifice Ratios and Inflation Targeting: The Role of Credibility," International Finance, Wiley Blackwell, vol. 17(3), pages 381-401, December.
    2. Hofstetter, Marc, 2010. "Sticky prices and moderate inflation," Economic Modelling, Elsevier, vol. 27(2), pages 535-546, March.
    3. Andrea Vaona, 2011. "Intra-national Purchasing Power Parity and Balassa--Samuelson Effects in Italy," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(3), pages 291-309, April.
    4. Mazumder, Sandeep, 2014. "The sacrifice ratio and core inflation," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 400-421.
    5. Mazumder, Sandeep, 2014. "Determinants of the sacrifice ratio: Evidence from OECD and non-OECD countries," Economic Modelling, Elsevier, vol. 40(C), pages 117-135.
    6. Bowdler, Christopher & Nunziata, Luca, 2010. "Labor market structures and the sacrifice ratio," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 816-826, September.
    7. Emmanuel De Veirman & Andrew T. Levin, 2011. "Cyclical Changes in Firm Volatility," CAMA Working Papers 2011-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    8. Siok Kun Sek & Wai Mun Har, 2012. "Does Inflation Targeting Work in Emerging East-Asian Economies?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(5), pages 599-608, December.
    9. Andrea Vaona, 2015. "Anomalous empirical evidence on money long-run super-neutrality and the vertical long-run Phillips curve," Working Papers 17/2015, University of Verona, Department of Economics.
    10. Sek Siok Kun, 2012. "Evaluating the performance of inflation targeting regime in three Asian economies," International Econometric Review (IER), Econometric Research Association, vol. 4(2), pages 82-98, September.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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