Sacrifice Ratios for Euro Area Countries – New Evidence on the Costs of Price Stability

Arbeitspapier

The purpose of this article is to deliver new estimates of the sacrifice ratio of Euro area countries. A high sacrifice ratio means a large loss of gross domestic product (GDP) or employment for a given reduction in inflation. In order to estimate the cost of adjustments in inflation rates by the sacrifice ratio, we apply, firstly, a structural vector autoregressive technique following Cecchetti and Rich (2001) and, secondly, one by Ball (1994) based on historical disinflationary episodes. Our findings indicate that most countries have sacrifice ratios of between -1 and 2 per cent of real GDP for a reduction in inflation of one percentage point. In some cases, these estimates deliver negative sacrifice ratios.

Object Details

• ISBN: 978-3-86788-595-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 520

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Macroeconomic Aspects of International Trade and Finance: Other
• Subject: sacrifice ratio ; structural adjustment ; Euro area ; VAR ; episode method ; Phillips curve

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Belke, Ansgar ; Böing, Tobias
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2014

Further information

• DOI: doi:10.4419/86788595
• Handle: http://hdl.handle.net/10419/104729
• Last update: 10.03.2025, 11:41 AM CET