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Disinflation in a DSGE perspective: Sacrifice ratio or welfare gain ratio?

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  • Ascari, Guido
  • Ropele, Tiziano

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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  • Ascari, Guido & Ropele, Tiziano, 2012. "Disinflation in a DSGE perspective: Sacrifice ratio or welfare gain ratio?," Journal of Economic Dynamics and Control, Elsevier, vol. 36(2), pages 169-182.
    • Handle: RePEc:eee:dyncon:v:36:y:2012:i:2:p:169-182
    DOI: 10.1016/j.jedc.2011.11.001
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    More about this item

    Keywords

    Disinflation; Sacrifice ratio; Non-linearities;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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