No. 736 - Sacrifice ratio or welfare gain ratio? Disinflation in a DSGE monetary model

by Guido Ascari and Tiziano Ropele
February 2010
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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.

Published in 2012 in: Journal of Economic Dynamics and Control, v. 36, 2, pp. 169-182

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  1. 05 February 2010
    No. 736 - Sacrifice ratio or welfare gain ratio? Disinflation in a DSGE monetary model
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