Sacrifice Ratios for Euro Area Countries: New Evidence on the Costs of Price Stability
Ansgar Belke () and
No 201411, ROME Working Papers from ROME Network
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 (SVAR) technique following Cecchetti and Rich and, secondly, an episode-based procedure proposed by Ball based on historical disinflationary episodes. The estimation results do generally not support empirical evidence of overly high sacrifice ratios and hence, on average, indicate relatively modest costs of structural adjustments in the Euro area.
Keywords: Sacrifice ratio; structural adjustment; Euro Area; VAR; episode method; Phillips curve (search for similar items in EconPapers)
JEL-codes: E31 F49 (search for similar items in EconPapers)
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http://www.rome-net.org/RePEc/rmn/wpaper/rome-wp-2014-11.pdf First version, 2014 (application/pdf)
Journal Article: Sacrifice Ratios for Euro Area Countries: New Evidence on the Costs of Price Stability (2014)
Working Paper: Sacrifice Ratios for Euro Area Countries – New Evidence on the Costs of Price Stability (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:rmn:wpaper:201411
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