Inflation and Policy Response - The Israeli Case: 1970-1989

Gottlieb, Daniel (1990): Inflation and Policy Response - The Israeli Case: 1970-1989. Published in: Price Dynamics (December 1992): pp. 71-91.

Abstract

The Israeli Economy has served as a laboratory for the study of inflation and government policy reponse. In periods crucial for Israel's experience of inflation, finance ministers were replaced frequently, often changing their predecessors' policies, much to the detriment of inflation. Inflation grew from an average of less than 10% per year in the decade preceding the first oil price shock to nearly 500% by the end of the first half of 1985. In the second half of 1985 a comprehensive and successful stabilization program masterminded foremost by Professor Michael Bruno brought inflation down to 15 to 20% at which level it stabilized until about 1991. The present paper which was written in early 1990 discusses Israeli inflation up to that time. In the years from 1992 to 2000 inflation was further reduced by quite a different strategy and since then Israel has been enjoying price stability.

• Item Type: MPRA Paper
• Institution: Bank of Israel
• Language: English
• Keywords: Inflation; Monetary Policy; Inflation expectations; Anti-Inflation Stabilization Plan; Orthodox policy; Heterodox Policy; Currency substitution; nominal anchor; Israel; Israeli Economy
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E65 - Studies of Particular Policy Episodes

References

Bruno, Michael and Fischer, Stanley, "Seigniorage, Operating Rules and the High Inflation Trap" (February 1991). NBER Working Paper Series, Vol. w2413, pp. -, 1991. Bruno, Michael and Fischer, Stanley, "The Inflationary Process in Israel: Shocks and Accommodation" (October 1984). NBER Working Paper Series, Vol. w1483. Drazen Allan & Elhanan Helpman, 1990, "Stabilization with Exchange Rate Management under Uncertainty," NBER Working Papers 2268, National Bureau of Economic Research. Gottlieb Daniel, Rafi Melnick and Sylvia Piterman, 1985, "Inflationary Expectations in Israel: A Multiple Indicators Approach," in Journal of Business and Economic Statistics, 3, No. 2, April, pp. 112-117. Gottlieb Daniel, 1989, "On the Determinants of a Country's Creditworthiness: The Case of Israel, 1971-1983," in Journal of Economic Development, 14, No.1, pp. 65-91.