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Can a Disinflationary Policy Have a Differential Impact on Sectoral Output? A Look at Sacrifice Ratios in OECD and Non-OECD Countries

Author

Listed:
  • Dinabandhu Sethi

    (Dinabandhu Sethi is at the School of Economics, University of Hyderabad, India, email: dinabandhu.hu2010@gmail.com)

  • Wing-Keung Wong

    (Wing-Keung Wong is at the Department of Finance and Big Data Research Center, Asia University, Department of Economics, Lingnan University, Hong Kong, email: Wong@asia.edu.tw)

  • Debashis Acharya

    (Debashis Acharya is at the School of Economics, University of Hyderabad, India, email: dass@uohyd.ernet.in)

Abstract

This article examines the sectoral impact of disinflationary monetary policy by calculating the sacrifice ratios for several Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. Sacrifice ratios calculated through the episode method reveal that disinflationary monetary policy has a differential impact across three sectors in both OECD and non-OECD countries. Of the three sectors, the industry and service sectors show significant output loss due to a tight monetary policy in OECD and non-OECD countries. But the agricultural sector shows a differential impact of disinflation policy: It shows a negative sacrifice ratio in OECD countries indicating that output growth is insignificantly affected by a tight monetary policy while non-OECD countries yield positive sacrifice ratios, suggesting that the output loss is significant. Further, it is observed that sacrifice ratios calculated from aggregate data are different from ratios calculated from sectoral data. JEL Classification: E52, E58, C14, O50

Suggested Citation

  • Dinabandhu Sethi & Wing-Keung Wong & Debashis Acharya, 2018. "Can a Disinflationary Policy Have a Differential Impact on Sectoral Output? A Look at Sacrifice Ratios in OECD and Non-OECD Countries," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(2), pages 138-170, May.
    • Handle: RePEc:sae:mareco:v:12:y:2018:i:2:p:138-170
    DOI: 10.1177/0973801017753260
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary Policy; Sacrifice Ratio; Sectoral Output Loss; Episode Method;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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