The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
This paper investigates the statistical properties of the U.S. sacrifice ratiothe cumulative output loss arising from a permanent reduction in inflation. We derive estimates of the sacrifice ratio from three structural VAR models and then conduct Monte Carlo simulations to analyze their sampling distribution. While the point estimates of the sacrifice ratio confirm the results reported in earlier studies, we find that the estimates are very imprecise and that the degree of imprecision increases with the complexity of the model used. That is, increases in the number of structural shocks widen our confidence intervals. We conclude that the estimates provide a very unreliable guide for assessing the output cost of a disinflation policy.
For a published version of this report, see Robert W. Rich, "Structural Estimates of the U.S. Sacrifice Ratio," with Stephen G. Cecchetti. Journal of Business and Economic Statistics 19, no. 4 (October 2001): 416-27.