Arbeitspapier
Disinflation in a DSGE Perspective: Sacrifice Ratio or Welfare Gain Ratio?
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.