What Determines the Sacrifice Ratio? A Bayesian Model Averaging Approach

Hajime Katayama, Natalia Ponomareva, Malvin Sharma

Research output: Contribution to journalArticle

Abstract

Existing empirical studies on the sacrifice ratio (measuring the output cost of disinflation) consider a large number of potential explanatory variables including the length of disinflation, various institutional settings, economic conditions, and the political climate. Some results are robust across different studies, while others are not. We address the presence of model uncertainty by using the Bayesian model averaging method to identify the important determinants of the sacrifice ratio, without relying on ad hoc model selection. Our results show that the length of disinflation is the most important variable. This supports the ‘cold turkey’ argument for faster disinflation.

Original languageEnglish
Pages (from-to)960-988
Number of pages29
JournalOxford Bulletin of Economics and Statistics
Volume81
Issue number5
DOIs
Publication statusPublished - 2019 Oct 1

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Bayesian Model Averaging
Averaging Method
Model Uncertainty
Model Selection
Climate
Empirical Study
Determinant
Economics
Output
Costs
climate
uncertainty
determinants
costs
economics
Disinflation
Sacrifice ratio
Bayesian model averaging

ASJC Scopus subject areas

  • Statistics and Probability
  • Social Sciences (miscellaneous)
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

Cite this

What Determines the Sacrifice Ratio? A Bayesian Model Averaging Approach. / Katayama, Hajime; Ponomareva, Natalia; Sharma, Malvin.

In: Oxford Bulletin of Economics and Statistics, Vol. 81, No. 5, 01.10.2019, p. 960-988.

Research output: Contribution to journalArticle

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