美联储-通货紧缩的产出成本有多大？（英）-2022.11-25正式版

FinanceandEconomicsDiscussionSeriesFederalReserveBoard,Washington,D.C.ISSN1936-2854(Print)ISSN2767-3898(Online)HowLargeistheOutputCostofDisin

ation?RobertJ.Tetlow2022-079Pleasecitethispaperas:Tetlow,RobertJ.(2022).\HowLargeistheOutputCostofDisin

ation?,"FinanceandEconomicsDiscussionSeries2022-079.Washington:BoardofGovernorsoftheFederalReserveSystem,/10.17016/FEDS.2022.079.NOTE:StaworkingpapersintheFinanceandEconomicsDiscussionSeries(FEDS)arepreliminarymaterialscirculatedtostimulatediscussionandcriticalcomment.TheanalysisandconclusionssetfortharethoseoftheauthorsanddonotindicateconcurrencebyothermembersoftheresearchstaortheBoardofGovernors.ReferencesinpublicationstotheFinanceandEconomicsDiscussionSeries(otherthanacknowledgement)shouldbeclearedwiththeauthor(s)toprotectthetentativecharacterofthesepapers.HowLargeistheOutputCostofDisinflation?*RobertJ.TetlowFederalReserveBoardWashington,D.C.,USANovember9,2022Thispaperexaminesestimatesof,anddriversfor,thesacrificeratio,definedasthecumulativesumofforegoneannualizedoutputaccruingfromadisinflationofonepercentagepoint.Threeapproachesareemployed.Thefirstreviewstheliteratureonwhatsacrificeratiomightbeexpected.Thesecondstudiesagenericdisinflationexperimentusing40estimatedmacromodelsoftheU.S.economy,calculatingadistributionofsacrificeratios.Thosesacrificeratiosarehighbyhistoricalstandardsandthepaperdiscussessomestoriesforwhythisisso.Theroleofexpectationsformationandthecredibilityofpolicyisemphasized.ThethirdapproachgetsunderthehoodofdriversoftheoutputcostofdisinflationbycarryingoutaselectionofdisinflationexperimentsusingtheFRB/USmodel,varyingcertaincharacteristicsofthemodel’sexpectationsformationmechanism.Pinningdownaprecisemeasurefortheoutputcostofdisinflationischallenging.Buttheliteratureandpolicyexperimentsdooffersomeguidanceonhowthesacrificeratiocanbereduced.Keywords:monetarypolicy,disinflation,sacrificeratio,expectationsformationJELCodes:E4,E5,E3SeniorAdviser,DivisionofMonetaryAffairs,20thandCStreets,NW,Washington,D.C.20551,USA.Email:rtetlow@IthankGiovanniFavara,EtienneGagnon,ChrisGust,JamesHebdenandBenJohannsenforhelpfulcomments.ThanksaswelltoJakeScottandConnorBrennanforexcellentresearchassistance.Allremainingerrorsaremine.TheviewsexpressedinthisarticlearethoseoftheauthoronlyandshouldnotbeattributedtotheFederalOpenMarketCommittee,theFederalReserveBoardoritsstaff.Theoutputcostofdisinflation1.IntroductionInflationintheUnitedStates,asmeasuredbythe12-monthchangeinthecorePCEpriceindex,asofthiswriting,is5.1percent.AndasupperpanelinFigure1shows,inflationhasbeenrunningabovetheFederalReserve’slonger-runinflationtargetoftwopercentforsometime.1Moreover,theinflationproblemisnotparticulartotheUnitedStates;inflationhasbeenabovetargetinahostofcountriesworldwide,andthusthequestionofwhattrade-offpolicymakersmightexpectastheyseektoreduceinflationisatimelyone.Oneconventionalmeasureofthepurportedtrade-offbetweenoutputandinflationisthesacrificeratio;thatis,thecumulativesumofforegoneoutputaccruingfromadisinflationnormalizedtobeonepercentagepoint,expressedintermsofpercentagepointsofoneyearofannualizedoutput.2Thisisanoldtopicinmonetaryeconomics,butonethathasreceivedscantattentionintheyearsfollowingtheVolckerdisinflationandthesubsequentGreatModeration.Thispaperexaminesestimatesof,anddriversfor,thesacrificeratiofortheUnitedStates.Thereareseveralwaysinwhichthiscanbedone.IntheUnitedStates,FederalReserveparticipants’forecastsprovideoneview.IntheirmostrecentSummaryofEconomicProjections,FOMCparticipantssuggestedthattheoutputtobeforgoneinthecourseofreducinginflationto2percentby2025wouldrenderasacrificeratioofabout2.2percentage-pointyearsofrealgrowth.3Aswewilldemonstratebelow,thisisalittleonthelowside,bymoststandards,butiswithintheplausiblebounds.Thispaperadoptsthreeapproachestoaddressingthisquestion.Thefirstlooksatwhattheliteraturehassaidthesacrificeratiomightbebasedonthehistoricalexperience.Asusefulasthedatamaybe,however,historyisrepletewithconfoundingshocksandconditionsthatmakeisolatingthepolicy-drivenpartofanysacrificedifficulttouncover.Thus,inasecondapproach,astandarddisinflationexperimentiscarriedoutusingarangeofmodernmacromodels—40ofthem,infact—fromwhichadistributionofsacrificeratiosiscalculated.Thatstep,whileilluminatinginsomeways,alsohasitslimitations,asweillustratewiththeaidofsomeexperimentsusingtheSmets-Woutersmodel.Thus,thethirdapproachattemptstogetunderthehood,asitwere,ofsacrificeratiodeterminationbyTheFederalReserve’sinterpretationofthepricestabilityhalfofitsdualmandateisaninflationobjectiveof2percent,inthelongerrun,measuredintermsof12-monthheadlinePCEinflation.Itcommonplace,however,fortheFedtodiscussinflationdevelopments,anddiscusspolicyoptions,intermsof12-monthcorePCEinflationbecausecoreinflationisabetterpredictoroffutureheadlineinflationthanisheadlineinflationitself.SeeFederalOpenMarketCommittee(2022a)fordetailsontheFed’sinterpretationofitsmandate.Thisdefinitionofthesacrificeratio,whichisentirelyconventional,impliesthatasacrificeratioof,say,fourisalossoffourpercentage-pointyearsofoutputinordertobringdowninflationbyonepercentagepointonasustainedbasis.Someauthorsdiscountthecumulatedoutputlosses,andsomeuseunemploymentsacrificeswhicharesometimesthenrecalculatedinoutputtermsusinganOkun’sLawcoefficient,asinfootnote1.ThecalculationinthemaintextisbasedonthemediansoftheSeptember2022SummaryofEconomicProjections(SEP)andassumesthatpotentialoutputgrowsatthe1.8percentgrowthratetheCommitteereportsasitslonger-rungrowthrate,thattheprojectedshortfallofoutputgrowthfrom1.8percentin2022isadownpaymentondisinflationthathasyettooccur,andthatinflationfallsfromthe4.9percent12-monthcorePCErateinAugust2022to2percentin2025.Atemporarychangeintherateofgrowthofpotentialoutputbroughtonbythepandemiccannotberuledout.SeeFederalOpenMarketCommittee(2022a).1carryingoutaselectionofdisinflationexperimentsusingtheFRB/USmodel,varyingcertaincharacteristicsofthatmodel’sexpectationsformationmechanism.Topreviewtheresults,thehistoricalrecordandtheliteraturemakeclearthatpinningdownaprecisemeasurefortheoutputcostofdisinflationischallenging,butasastatisticalmatteritappearstohaverisensignificantlyoverthepast30yearsorsoandcurrentlyisprobablyquitehighbypost-warhistoricalstandards.However,thereisreasontoquestionhowmuchthehistoricalrecordcantellus,andthereissomeguidancefromtheliteratureingeneralandmodel-basedexercisesinparticular,onhowthecostcanbereduced.Modelexperimentsshow,andthehistoricalrecordsupports,thatthewayadisinflationpolicyisimplementedandhowitiscommunicatedcan,inprinciple,affecthowexpectationsadjust,whichinturncanamelioratetheoutputcostofdisinflation.Amongthehomilies2Theoutputcostofdisinflationthatariseisanoldfavorite:itishelpfultoactpromptlyandforcefullytocounterhighlevelsofinflationbeforehigherinflationbecomesembeddedinlong-terminflationexpectations.42.WhattheliteraturehastosayTheliteraturehastraditionallyfocusedontwokeychannelsdrivingthesacrificeratio,whichcanbeusefullysummarizedundertheheadingsofintrinsicadjustmentcostsandexpectationaladjustmentcosts.Intrinsicadjustmentcosts,whichincludestickypricesandwagesandindexing,candifferfromcountrytocountry,orperiodtoperiod,butarethoughttonotvarywithmoderatechangesinmonetarypolicy.Expectationaladjustmentcostsincludetheupdatingofbeliefsregardingpricesandwagesandotheraspectsoftheeconomythatdeterminepriceinflation,aswellasthecredibilityofpolicy;expectationaladjustmentcostsmayvarywithpolicy.5Muchofthenormativedebateonthedeterminantsofthesacrificeratiocanbestatedintermsoftwoquestions.Thefirstquestionconcernstheproportionofthepersistenceofinflationthatarisesfromintrinsicadjustmentcostsasopposedtoexpectationaladjustmentcosts.Themoreonethinksofthepersistenceofinflationinhistoryashavingstemmedfromexpectations,themorethedoorisopenedforpolicytodetermine,atleastinpart,whatthesacrificeratiomightbe.Thesecondquestionconcernshowamenableexpectationaladjustmentcostsaretopolicymakers’decisionsregardinghowtheycarryout,andhowtheycommunicate,monetarypolicy.Themoreeconomicagentscanbeguidedtoadjusttheirexpectationsoffuturepricesviapolicycommunicationsandpolicycommitments,thelessmonetarypolicyhastodothroughtheadoptionofarestrictivepolicystanceandthelowertheoutputcostofdisinflation.Onetraditionalviewisthatdisinflationislessexpensiveifitoccursslowly—gradualismintheapplicationoftightening,tousethelanguagethatbecameconventionalinthe1970s—sothatwagesandpriceshavetimetoadjusttotighterpolicy(see,e.g.,Meltzer,1980).Anopposingview,oftencalledthecoldturkeyapproach,holdsthatarapiddisinflationcanbelesscostly,becausespeedinducesexpectationstoadjustdiscretely(Sargent,1983;Bomfimetal.,1997).6Itwasoncecommontoargue—lesssomorerecently—thatdisinflationislesscostlyiftightmonetarypolicyisaccompaniedbyincomesWritingintheWallStreetJournalonOctober30,2022,formerFedvicechairAlanBlinderarticulatedthispoint:“TheinflationMr.Powellisdealingwithisayoungster...lastinghighinflationisn’tbakedintopeople’sbeliefs.Theyrememberlowinflation,andtheythinkitwillreturn”(Blinder2020).Inthelimitingcaseoffull-informationrationalexpectationswithacompletelycrediblemonetarypolicyregime,expectationaladjustmentcostscouldbezero.Itseemsfairtosaythatthegradualistapproachwasthedominantview,fromanormativeperspective,inthelate1960sand‘70s.TheexperienceoftheVolckerdisinflationchangedviewsanditisnowthecoldturkeyapproachthatispreferred,onbalance,ifoneisobligedtochoosebetweenthosepolarcases.Italsoseemsfairtoconcludethatthepropercourseofactiondependsoncertainconditions,ofwhichthetransparencyandcredibilityofpolicyisperhapsthemostimportant.Bordoetal.(2017)arguethatgradualismisprobablybetterinanenvironmentofhighpolicycredibilityandcoldturkeyinalowcredibilityworldwhereacostlypolicymovecansignalfidelitytothedisinflationgoal.3policiesorothereffortstocoordinatewageandpriceadjustment.7Manyresearchersarguethattheoriginsofpricestickinesscouldmeanthattheinitialinflationratefromwhichadisinflationiscarriedoutwouldhavesizableeffectsoncosts(Ball,Mankiw,andRomer,1988;AndersonandWascher,1999).8Inmanymodels,observedinflationtendstofluctuatearoundsomeconceptoflong-terminflationexpectations(LTIE),withcausalitybetweenthetwooftenrunninginbothdirections.ReducinghighobservedinflationtothelevelofLTIEis,inmanymodels,notverycostly,buthighinflationthatmirrorshighLTIEisthoughttobemorecostlytobringdown.9,10Othercontributionstotheliteraturesuggestthattheopennessoftheeconomy(Romer,1991;Daniels,etal.,2005;Boudler,2009),orthenatureoflaborcontractsshouldmatter(Gordon,1982).11Table1showssacrificeratiosfortheUnitedStatesforepisodesofdisinflationasgleanedfromtheacademicliteratureofthepastfortyorsoyears.Theright-handcolumnshowsthatmeasuresofsacrificeratiosariseoutofvariousmethodologies.Somearecalculatedbysimplearithmeticusingrawdataonoutput(orunemployment)andchangesininflationovertheexpostidentificationofaperiodoffallinginflation.ManyofthecalculationsfollowthemethodologyofBall(1994)whichdefinedadisinflationasa“substantial”declineintrendinflation,wheretheformerisdefinedastwopercentagepointsormoreandthelatteriscalculatedusinganine-quartercenteredmovingaverageofCPIinflation.Ballcomputestrendoutputasthelevelofoutputatthebusinesscyclepeakrelativetowhatitwasoneyearaftertheprevioustrough.OthersacrificeratiosareconstructedfromtheestimatedcoefficientsofJamesTobin,addressedthequestionofhowtobringdowninflationincommentstoaWashingtonPostreportershortlyafterwinningtheNobelprizein1981.Tobinarguedthat“wearenotgoingtohaveasuccessfuldisinflationwithoutsomekindofwageandpricecontrols”andthat“relyingontightmoney…willworkeventuallybutisaverypainfulwaytodoitandverycostlytotheeconomy”(Quinn,1981).TheVolckerdisinflationwasindeedpainful—theunemploymentratereached10.8percent—butTable1showsthatBall(1994)recordsasacrificeratioforthatepisodeof1.8,meaningthatthecostperunitofinflationreductionwasnotallthatlarge.Gagnon(2009)arguesthatthefrequencyofpricechangesshouldnotbeexpectedtoincreasesubstantiallyformodestincreasesintheaggregateinflationratefromlowinitiallevelsofinflationandprovidessomeevidencefromMexico.Nakamuraetal.(2018)usemicrodatatoshowthat,contrarytowhatonemighthaveexpected,technologicalimprovementsinretailandwholesaletradehavenotincreasedtheflexibilityofpricesintheU.S.overthelastfortyyears.ThedistinctionbetweenactualinflationandLTIEisonereasonwhythelevelofinflationattheonsetofadisinflationaryepisodeisoftenpositedasadeterminantofthesacrificeratio.InflationthatisunusuallyhighmaybeaboveLTIEandthuseasiertobringdown,atleasttothelevelofLTIE.Onamorestructurallevel,highlevelsofinflationmaybeassociatedwithmorerapidfrequencyofpriceadjustmentwhichwouldresultinalowersacrificeratio(Ball,MankiwandRomer,1988).Asanempiricalmatter,theevidenceontheimportanceoftheinitiallevelofinflationismixed(Ball,1994).PolicythatisnotregardedascrediblecouldresultinincreasesininflationbecomingembeddedmorerapidlyinLTIEthanotherwiseinadditiontoraisingthesacrificeratioviadampeningtheexpectationschanneloftransmission.SeeGoodfriendandKing(2005)andGibbsandKulish(2017)expositionsontheimportanceofthecredibilityofmonetarypolicyforminimizingtheoutputcostsofdisinflation.Ininternationalcomparisonsofsacrificeratios,institutionalfeatures,suchpoliticalstability,goodgovernance,andcentralbankindependence(CBI)areoftencitedasimportant(Fischer,1996),althoughtheevidenceregardingCBIismixed.Theevidenceonthesignificanceofhavinganinflation-targetingregimeinplaceisalsomixed.Moregenerally,GibbsandKulish(2017)showsthatthedistributionofsacrificeratioscalculatedfromthedatausingtheBallmethodalsoshowsalotofvariability.4Theoutputcostofdisinflationwage-priceblocsofequations.Stillothersarecomputedfromsimulationsoffullmodels.ThesacrificeratiosshowninTable2appear,roughlyspeaking,inorderofthetimeperiodfromwhichtheyweremeasured.DatacanalsomatterasindicatedbythedifferenceinthecalculationsfortheVolckerdisinflationofMankiw(1991),whichwasbasedontheGDPpricedeflator,andBall(1994),whousedasimilarmethodologybutbasedontheCPI.12Table1EstimatesofOutputSacrificeRatiosfromHistoricalEpisodes(selectedacademicreferences)SourceEstimationSacrificeRatioMethodologyPeriodOkun(1978)Various6-18Surveyof6modelsGordon(1982)1920–19210.2Calculation1929–19331.7CalculationBall(1994)1969:4–1971:42.9*Calculation(CPI)Ball(1994)1974:1–1976:42.4*Calculation(CPI)GordonandKing(1982)1954–19804.3–5.8EconometricmodelBall(1994)1980:1–1983:41.8*Calculation(CPI)Sachs(1985)1981–19843.0CalculationMankiw(1991)1982–19852.8Calculation(PGDP)AndersenandWascher(1999)1965–19852.7–4.3EstimatesofPhillipscurves**Sachs(1985)1984–19873.7ModelsimulationCroushore(1992)1959:1–1990:25.5SimulationofPstarmodelMPS(1995)1963–19933.6Simulation***CecchettiandRich(2001)*1959:1–1997:41.4SimulationofCecchettimodel1959:1–1997:41.3SimulationofShapiro-Watson1959:1–1997:49.9SimulationofGalímodelAndersenandWascher(1999)1985–19986.2–6.7EstimatesofPhillipscurves**GibbsandKulish(2017)1990:1–1995:214.1Calculation,Ballmethodology2007:3–2010:13.1Calculation,BallmethodologyNotes:SacrificeratioscalculatedorcomputedforspecifichistoricaleventsintheUnitedStates.Methodologycanvarybysource,butalladherefairlycloselytothedefinitionfromthemaintext:thesacrificeratioisthecumulativesumofforegoneoutputfromareductionofinflationscaledtoonepercentagepoint,expressedintermsofasingleyear’sGDP.Ball(1994)isveryoftenthetemplateforcalculationsthatfollowedthereafter.*ConvertedfromanunemploymentsacrificeratiousingOkun’sLawcoefficientoftwo.**Fromtheauthors’tables2and4,basedonPGDP.***Unpublishedresultsfromasimulationusingthe1995versionoftheMPSmodel.TheofficialCPIfortheU.S.isneverrevisedeventhoughthemethodologyforitsconstructionhaschangedovertime.However,Bolhuis,CramerandSummers(2022)recentlyconstructedanhistoricalseriesfortheCPIusingcurrentmethods.UsingtheirmeasureofCPIinflation,theVolckerdisinflationwasjust5percentagepointsratherthan11percentagepointscalculatedusingtheofficialCPI.MeasuredintermsofheadlinePCEinflation,however,theVolckerdisinflationcalculatedusingthecurrentvintageofdatalookssimilartovintagesfromearly1983.5Twoconclusionscanbedrawnfromthistable.First,thereisalotofvariationinsacrificeratios.Nosinglenumberjumpsoutasthecorrectone.Second,roughlyspeaking,thereseemstobeanupwardtrendinsacrificeratiosovertime.13Intermsofthedeterminants,Ball(1994)findsthatthesacrificeratioisdecreasinginthespeedofdisinflation;thatis,speedincarryingoutdisinflationsisbeneficial,afindingthatisconsistentwithSargent(1983).Katayamaetal.(2019)arguethattheonefindingthatisrobustacrossmodelsinthisliteratureisthatfastisgood.Andindeed,assevereasthe1982recessionwasfortheU.S.economy,itscostperunitofinflationreductionwasnotablysmallerthanmanycommentatorshadexpected.14Bomfimetal.(1997),amongothers,arguethattworeasonswhytheVolckerdisinflationwaslowcostwere,first,becausethatdisinflationwascarriedoutshortlyafterthesecondOPECoilpriceshockof1979andthusbeforetheriseininflationfromthatshockcouldbecomeembeddedinlong-terminflationexpectations,andsecond,becausethedisinflationwascarriedoutrapidly.Authorsoftenfindthatthesacrificeratioislowerincountrieswithmoreflexiblelabormarketcontracts,asisthecaseintheUnitedStates.(Ball,1994;BoudlerandNunziata,2010).TheoverallimpressionofarisingsacrificeratioisconfirmedincomparisonsofthesacrificeratioscomputedfromdifferentvintagesoftheFRB/USmodel.Figure2below,whichisextractedfromTetlowandIronside(2007),showstheunemploymentsacrificeratioindexedbymodelvintageonthex-axis,ascomputedfromdisinflationexperiments.ThefigureshowsthattheFRB/USsacrificeratiorosefromalittleover2fromthemodel’sinceptionin1996,toabitover4in2003.Thesacrificeratiomeasuredintermsofforgoneoutputwouldbealmosttwiceashighateachpoint.ThisresultofarisingoutputcostofdisinflationisnotrestrictedtotheFRB/USmodel;rollingestimationofsimplePhillips-curvetypemodelsrevealsthesamebasicproperty(see,e.g.,Watson,2014).Inparticular,aregressionofthechangeininflationontheoutputgapalongwithsomecontrolsforchangesinfoodandenergypricesandnon-oilimportprices,usingarollingwindowofdataofanyreasonablelength,showsadistinctdownwardtrendovertimeintheestimatedcoefficientontheoutputgap.Inthespecialcaseofthissimple“accelerationist”specification,theslopeofthePhillipscurvemapsdirectlyintothesacrificeratio.Whattotakefromthisevidenceofthereducedsensitivityofinflationtofluctuationsinoutputisnotasclearasmightappeartobethecase.McLeayandTenreyro(2019),amongothers,arguethattheperceiveddeclineinsteepnessofthePhillipscurvecouldeasilybeamanifestationofweakeridentificationofthatparameterarisingfromimprovedcontrolofinflationbytheFed,andothercentralbanks,duringtheGreatModerationera.Thatis,policymakerscouldbe“victimsoftheirownsuccess”inThisistrueparticularlyforestimatesthatapplytospecific,narrowly-definedepisodesasopposedtomodelestimatesforlongerperiods;thatis,thoseotherthanCroushore(1992)andCecchettiandRich(2001).ItisfairtosaythatOkun(1978)settheexpectationsofmanyregardingwhatoutputcosttheVolckerdisinflationshouldbe:6-18percentagepointyearsofeconomicgrowth,asshowninthefirstlineofTable1.6Theoutputcostofdisinflationthatgoodperformanceincontrollinginflationhasobliteratedtheinformationcontentofthedata,therebymakingcontinuedgoodperformanceharderthanwouldotherwisebethecase.3.What40macroeconomicmodelshavetosayVolkerWielandandhiscolleaguesattheInstituteforMonetaryandFinancialStability,GoetheUniversity,Frankfurt,havecreatedamacroeconomicmodeldatabaseofmostlyU.S.andEuroareamodels.Authorsofpaperseithervolunteer,orareasked,tosupplymodelsforthepurposesofcomparingmodelpropertiesingeneralandtherobustnessofalternativemonetarypolicyrulesinparticular.15Inthissection,weexplorewhatthesemodelshavetosayaboutsacrificeratios.Webeganwiththecompletesetof88U.S.macromodelsonthemacromodelbase(MMB)website,butsubsequentlyrestrictedattentiontoestimatedmodelsonthegroundsthattheyarelikelyTheMacromodelbase(MMB)projectisapartoftheMacroeconomicModelComparisonInitiative,ajointproductoftheHooverInstitutionandtheInstituteforMonetaryandFinancialStabilityatGoetheUniversity.MMBiscurrentlyledbyVolkerWielandwithprincipalinvestigators,MichaelBinderandJohnTaylor.Besidesprovidingsomeofthemodelsthemselves,thepeopleatMMBreplicatecertainfeaturesofmodeloutputsandaddcodetofacilitatecross-modelcomparisons.Findtheprojectat.7tobemorereliableforpresentpurposes.Sevenmodelswererejectedasunsuitableforonereasonoranother,leaving40models.Sacrificeratioswerecomputedviasimulation,implementinganunanticipateddisinflationinducedbyaonce-and-for-allreductioninthetargetrateofinflation.16Consistentwiththedefinitionusedabove,sacrificeratioswerecalculatedastheannualizedcumulativeoutputlossfromtheexperimentdividedbythedecreaseinheadlinePCEinflationasofquarter60.17TheresultsofthesesimulationsaresummarizedinTable2andFigure3below.The40modelsandtheirsacrificeratiosaresummarizedintheAppendix.Table2SacrificeratiosfromestimatedU.S.macroeconomicmodels(selectedsummarystatistics)mean16.1median9.8standarddeviation16.1maximum55.4skewness1.37numberofmodels40Notes:Sacrificeratiosaretheannualizedcumulatedoutputlossdividedbytheabsolutedeclineintheinflationrate,measuredatthe60thperiodofadisinflationexperimentusinganinertialTaylorrulewithazerocoefficientonoutput(orunemployment).Sources:M;author’scalculations.AsinthesurveysummarizedinTable1,thereisalotofvariationinthesacrificeratiosinTable2andFigure3.Thatsaid,thesacrificeratiosaremostlyclusteredaroundthemodeof7,withasecondsmallerclusteratmuchhighervalues.Moreimportant,thesacrificeratioscomputedfromthesemodelsarenotablyhigherthanthebulkofthehistoricalvaluesshowninTable1.Whymightthisbe?Threereasonscometomind.First,theworkscoveredinTable1prominentlyfeatureoldermodelsorhistoricalcalculations,coveringmostlytheperiodpriortotheGreatModeration.Incontrast,asubstantialmajorityofthe40modelsusedintheconstructionofFigure2wereestimatedinthelasttwentyyearsmostlyusingdatafromtheGreatModerationera.Theearlyperiodwasoneofsubstantialvolatilityininflationandininflationexpectations.Fluidityininflationexpectationsisregardedasanassetinthequestfordisinflation.Ineachcase,thedisinflationwascarriedoutbyreducingbyonepercentagepoint,onceandforallattheoutsetoftheexperiment,thetargetrateofinflationinaTaylor-typemonetarypolicyrule.Theparticularrulefeaturedinertiainthatithadalaggedpolicyratewithacoefficientof0.75,acoefficientonfour-quarterinflationof2andnocoefficientonanyrealvariabletoensurethatattainmentofthedisinflationwasnotconflictedbyanymotivetosmoothoutput.Inordertoensurecomparability,experimentswerecarriedoutfrominitialconditionsofsteadystate.