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Inflation-output trade-off: Old measures, new determinants?

Georgios Magkonis () and Kalliopi-Maria Zekente

Journal of Macroeconomics, 2020, vol. 65, issue C

Abstract: This study analyses the determinants of the sacrifice ratio; i.e., the output cost of disinflation. The empirical literature so far has used several model specifications, indicating the degree of model uncertainty. Even for those factors where consensus on their significance has been reached, such as trade openness and central bank independence, considerable uncertainty still surrounds their estimated sign. Motivated by the above, we estimate the most important drivers of the sacrifice ratio based on Bayesian model averaging, for a panel data set of 42 countries. Our findings confirm part of the evidence reported in the prior empirical literature, while it sheds light on the importance of other factors.

Keywords: Sacrifice ratio; model uncertainty; model averaging (search for similar items in EconPapers)
JEL-codes: E31 E32 F40 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jmacro.2020.103217

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