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

  • Ascari, Guido
  • Ropele, Tiziano

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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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 2 ()
Pages: 169-182

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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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