This drift has amplified the goods disinflation
and explains why PCE measures of inflation are running below CPI measures.
This paper's empirical method allows us to measure the sacrifice ratio as the costs of a deliberate disinflation
policy in contrast to, for example, the output costs of a series of negative cost push shocks.
in Latin America and the Caribbean: A Free Lunch?" Journal of Macroeconomics, 2007, doi: 10.1016/j.jmacro.2006.
Models of parameter uncertainty and learning have also addressed questions about gradual versus rapid disinflation
. With results similar to ours, Balvers and Cosimano (1994) find that rapid disinflation
is preferred when inflation is high, although in their framework rapid reduction in money growth is warranted to facilitate learning.
286) writes, "The result that disinflation
causes a boom may appear counterintuitive, given the usual view that disinflations
The fluctuations in these markets, however, occurred in an era of aggregate price inflation followed by a sharp disinflation
, which, according to Schwartz, increased the severity of the resulting financial distress.
appears to be consistently more costly and no more rapid in countries with independent central banks, even holding wage indexation constant.
The flat portion of the Phillips curve also has implications for the timing of deliberate disinflations
. The linear Phillips curve indicates that once output is below trend, inflation pressures fall.
In addition, even when the Fed pays the price of disinflation
, the gains may not be permanent.
stabilization, that is, the branch dealing with disinflations