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Sacrifice ratio or welfare gain ratio? Disinflation in a DSGE monetary model

Author

Listed:
  • Guido Ascari

    (University of Pavia and Kiel Institute for the World Economy)

  • Tiziano Ropele

    (Bank of Italy and Kiel Institute for the World Economy JEL classification: E31, E5)

Abstract

When taken to examine disinflation monetary policies, the current workhorse DSGE model of business cycle fluctuations successfully accounts 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.

Suggested Citation

  • Guido Ascari & Tiziano Ropele, 2010. "Sacrifice ratio or welfare gain ratio? Disinflation in a DSGE monetary model," Temi di discussione (Economic working papers) 736, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_736_10
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    References listed on IDEAS

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    Cited by:

    1. Ascari, Guido & Ropele, Tiziano, 2013. "Disinflation effects in a medium-scale New Keynesian model: Money supply rule versus interest rate rule," European Economic Review, Elsevier, vol. 61(C), pages 77-100.
    2. Eric Schaling & Marco Hoeberichts, 2010. "Why Speed Doesn’t Kill: Learning to Believe in Disinflation," De Economist, Springer, vol. 158(1), pages 23-42, April.

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    Keywords

    disinflation; sacrifice ratio; non-linearities;
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