BROWSE

Sacrifice Ratio

What is the 'Sacrifice Ratio'

The sacrifice ratio is an economic ratio that measures the costs associated with slowing down economic output to change inflationary trends. The ratio is calculated by taking the cost of lost production and dividing it by the percentage change in inflation, and its quotient gives the loss of output per 1% change in inflation:

Explaining 'Sacrifice Ratio'

If inflation is becoming a problem, central banks will try to cool economic growth in a bid to reduce inflationary pressures. However, this reduction in output costs the economy in the short term, and the sacrifice ratio tries to measure that cost.


Further Reading


Disinflation in a DSGE perspective: Sacrifice ratio or welfare gain ratio?
www.sciencedirect.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …

Monetary policy transparency, inflation and the sacrifice ratioMonetary policy transparency, inflation and the sacrifice ratio
onlinelibrary.wiley.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …

Central bank independence, speed of disinflation and the sacrifice ratioCentral bank independence, speed of disinflation and the sacrifice ratio
link.springer.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …

Sacrifice Ratios with Long‐Lived EffectsSacrifice Ratios with Long‐Lived Effects
onlinelibrary.wiley.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …

Exchange-rate pass through, openness, and the sacrifice ratioExchange-rate pass through, openness, and the sacrifice ratio
www.sciencedirect.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …

Sacrifice ratio dispersion within the Euro Zone: what can be learned about implementing a single monetary policy?Sacrifice ratio dispersion within the Euro Zone: what can be learned about implementing a single monetary policy?
www.tandfonline.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …

Central bank independence, disinflations, and the sacrifice ratioCentral bank independence, disinflations, and the sacrifice ratio
journals.sagepub.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …

Determinants of the sacrifice ratio: Evidence from OECD and non-OECD countriesDeterminants of the sacrifice ratio: Evidence from OECD and non-OECD countries
www.sciencedirect.com [PDF]
… Disinflation is a long-standing issue in monetary economics … We note first of all that the theoretical sacrifice ratios are positive and in line with the existing empirical estimates … In particular, the sacrifice ratio turns out to be approximately 1.05 when ϕ = 1.5 ; whereas it takes up a …



Q&A About Sacrifice Ratio


What does the sacrifice ratio try to measure?

The sacrifice ratio tries to measure loss of output per 1 change in inflation.

When will there be more than one way for a central bank to reduce inflationary pressures?

There may be more than one way for a central bank to reduce inflationary pressures when there are multiple sources of pressure on prices.

How does the sacrifice ratio measure costs?

The sacrifice ratio measures cost by taking lost production and dividing it by percentage change in inflation.

How might you calculate the loss of output per 1% change in inflation using this formula from above (1)?

You would divide 100 by your answer from question 6 (the number of ways). For example if there were two ways you would divide 100/2 = 50%. If there were three ways you would divide 100/3 = 33%. If there were four ways you would divide 100/4 = 25%. And so on...

Is it possible for a country's economy not have any losses when reducing growth rates due to high levels of unemployment or other factors such as low productivity or weak demand?

Yes, it is possible for an economy not have any losses when reducing growth rates due to high

What is the sacrifice ratio?

The sacrifice ratio is an economic ratio that measures the costs associated with slowing down economic output to change inflationary trends.

Why do central banks try to reduce inflationary pressures?

Central banks try to reduce inflationary pressures because they can lead to a decrease in spending and investment, which can cause a recession or depression.

What are some ways that central banks will try to reduce inflationary pressures?

Central banks may increase interest rates, sell bonds, or buy foreign currency for example.

Leave a Reply

Your email address will not be published. Required fields are marked *