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Disinflation in a DSGE Perspective: Sacrifice Ratio or Welfare Gain Ratio?

  • Guido Ascari
  • Tiziano Ropele

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

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1499.

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Length: 31 pages
Date of creation: Mar 2009
Handle: RePEc:kie:kieliw:1499
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