Published in:Banque de France Working Paper ; No. 163
Extent:
1 Online-Ressource (50 p)
Language:
English
DOI:
10.2139/ssrn.1694547
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 1, 2007 erstellt
Description:
In this paper, we seek to estimate the sacrifice ratio of the euro area using a small DSGE model where prices and wages are sticky. We estimate model's parameters so as to minimize the distance between VAR-based and model-based covariances of a set of variables. The estimated value of the sacrifice ratio reaches 1.30%. In a second step, we proceed to a set of counterfactual exercises in order to highlight the link between the sacrifice ratio and the degree of prices and wages stickiness. We obtain that a decrease of prices stickiness does not necessary result in a decrease of the sacrifice ratio. In addition, the sacrifice ratio rises with the degree of wage stickiness