Israel’s Post-Stabilization Recession: Monetary Factors
For more than a decade after the Yom-Kipur war, Israel muddled through a high inflation, balance-of-payments crises with almost no growth. In July 1985, the government launched a comprehensive stabilization program. Inflation was brought down sharply, almost overnight, from a three-digit annual level to 15–20 percent. At the same time, the accelerated increase in Israel’s external debt was brought to an end and Israel’s financial standing in the international capital markets improved significantly. These accomplishments are still in place today, five years later.
KeywordsExchange Rate Interest Rate Monetary Policy Real Exchange Rate Real Wage
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