Measuring sacrifice ratio by episode method : methodological issues and conflicting results for an emerging market economy

Abstract

This paper /fogs some of the important issues concerning estimation of sacrifice ratio for emerging market economies in general and for the Indian economy in particular. A survey of the most recent studies in the area and some of our own results indicates that sacrifice ratio estimates depend on ahost of factorsconnected with the episode methodology. The factors are the appropriate definition of an episode, anarbitrary length of output loss and proper measurement procedure.