Sacrifice Ratio and Disinflation Cost for Selected OPEC Member Countries: Panel Data Evidence

Abstract

Average inflation in industrial countries has been low since the early 1990s, reflecting success in stabilizing inflation after the 1970s and early 1980s, impact of the process of globalization on inflation is not limited to advanced and industrialized countries and several developing countries compared to advanced countries experienced these affect with some years lags. In this study output losses for disinflation episode that named sacrifice ratio will estimate by ball method during 1990-2013 for selected OPEC member countries. Panel Cointegration method and Dynamic Ordinary Least Square (DOLS) results show that there are positive relationship between inflation changes with sacrifice ratio and negative relationship between initial inflation and openness with sacrifice ratio. This means that cost of disinflation reduced up to 8 percent by increasing in openness and this value for inflation rate changes causes 11 percent sacrifice ratio change.