What Determines the Sacrifice Ratio?

Laurence Ball

No 4306, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the determinants of the "sacrifice ratio" for disinflation: the ratio of the loss in output to the fall in trend inflation. I develop a method for estimating the sacrifice ratio in individual disinflation episodes, and apply it to 65 episodes in moderate-inflation OECD countries. In this sample. the sacrifice ratio is decreasing in the speed of disinflation: cold turkey is less costly than gradualism. The ratio is also decreasing in the flexibility of wage-setting institutions. The openness of the economy has no effect on the ratio. and the effects of incomes policies and the initial level of inflation are unclear.

JEL-codes: E31 E32 (search for similar items in EconPapers)
Date: 1993-03
Note: EFG ME
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Citations: View citations in EconPapers (59)

Published as Monetary Policy, ed. N.G. Mankiw, University of Chicago Press, 1994
Published as What Determines the Sacrifice Ratio? , Laurence Ball. in Monetary Policy , Mankiw. 1994

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Related works:
Chapter: What Determines the Sacrifice Ratio? (1994)
Working Paper: What determines the sacrifice ratio? (1993)
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