Sacrifice Ratio

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Sacrifice Ratio

The cost to an economy when growth slows or stops in order to combat inflation. The ratio shows the cost for each percentage of decrease in inflation. It is calculated thusly:

Sacrifice ratio = (Dollar cost of lost production) / (Percentage of change to the inflation rate)
References in periodicals archive ?
Section V tests the robustness of the results under the assumptions that loans are denominated in foreign currency, Section VI reports results for a shocks to the uncovered interest rate parity, and Section VII report results for the sacrifice ratios.
65 shocks TABLE 7 Sacrifice Ratios (Output-Inflation Volatility Ratios) Implied by the Model Under Different Exchange Rate Regimes in the Models with and without Financial Frictions Floating Exchange Rates Type of Shock [rho](.
In later studies, sacrifice ratios have been estimates by using VAR models.
Sacrifice ratios have received much attention because of deflation in most developed countries.
Monetary policy and macroeconomic stabilization; the roles of optimum currency areas, sacrifice ratios, and labor market adjustment.
In Section III, we identify disinflation episodes in annual and quarterly data for 17 Organization of Economic Co-operation and Development (OECD) countries and calculate the sacrifice ratios.
The idea of using inflation history as a determinant of sacrifice ratios is, to our knowledge, first proposed in Hofstetter (2007).
Also, Jordan (1997) estimates what he calls "benefice ratios" as well as sacrifice ratios.
1) For the disinflation in the early 1980s in the United States, Fischer (1986) figures the sacrifice ratio was about five.
The denominator for the sacrifice ratios is the peak in trend inflation less the trough in trend inflation.
The Data Appendix lists the countries, the dates of peak inflation, the sacrifice ratios, and the duration of rising inflation prior to the disinflation.
However, sacrifice ratios are not true cost-benefit ratios: They gauge the costs of lost output, but do not assess the benefits from the lower inflation rate.