Sacrifice Ratio


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Related to Sacrifice Ratio: Okun's law

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 ?
Given the estimated sp[kappa]d of learning, we compute the macroeconomic effects of a 100 bp disinflation focusing on the sacrifice ratio and the monetary policy effort.
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.
Traditional studies of the sacrifice ratio proceeded by estimating a Phillips curve (Okun, 1978; Gordon, 1982).
Low-inflation countries will have a relatively flat Phillips curve and a large sacrifice ratio, while high-inflation countries will have a steep Phillips curve and a small sacrifice ratio.
Therefore, both weaker inflation persistence and a flatter slope imply a larger sacrifice ratio, which is especially troublesome for monetary policymakers.
The resulting inflation persistence and high sacrifice ratio, even though artifacts of monetary policy, make the FOMC reluctant to announce an explicit inflation target.
This result has particular significance since it establishes that the model predicts a sacrifice ratio which is decreasing with the degree of nominal wage indexation.
For example, the difference between the sacrifice ratios for Canada and the United States is a result of a larger weight on lagged CPI inflation in the Canadian price block (0.
Among the 15 countries for which significant coefficients for both lagged inflation and the NAIRU gap [NAIRU resulting from Hodrick-Prescott (100) filter] are obtained, the estimated NAIRU gap parameter based on the unemployment rate Grande region is the fifth-biggest (after Austria, Denmark, Greece, and Switzerland), implying comparatively low sacrifice ratios.
The sacrifice ratio (SR) is the ratio of the total output loss to the reduction of inflation g.
If the total costs of going from 2 percent to zero inflation is 4 percent of GDP, as implied by a sacrifice ratio of 2, the break-even point turns out to be B* = C(d - g) = 0.
25 point-years of unemployment to the sacrifice ratio of an average disinflation.