Inflation and Disinflation: The Israeli Experiment

Front Cover
University of Chicago Press, Jul 15, 1993 - Business & Economics - 333 pages
During the early 1980s, Israel's inflation rate rose to almost 500% per year—one of the highest inflation rates in the developed world. In 1985, the Israeli government implemented a program that immediately reduced inflation to 15%-20%, where it remained for the rest of the decade. How did the economy deal with these major changes so rapidly and successfully? In these eighteen articles, Leonardo Leiderman discusses why the Israeli plan worked and considers how other countries might benefit from similar policies.

Even though standard economic models predict that output will drop and unemployment will rise during disinflation, Israel saw a boom in private consumption and large increases in real wages that lasted for about three years. To understand how the effects of Israeli disinflation policies defied typical expectations, Leiderman investigates how monetary fiscal policy determined Israel's runaway inflation and how the country brought its economy abruptly under control. He finds that rates of inflation and consumption depend on the public's expectations about future fiscal adjustments and that foreign trade shocks do not inevitably lead to a long-term rise in the inflation rate. His illumination of international trade and domestic policies, past and present, will interest academic economists and policymakers alike.
 

What people are saying - Write a review

We haven't found any reviews in the usual places.

Contents

The Main Lessons
3
Analytical
9
Real Wages Monetary Accommodation and Inflation
66
Comparing Macroeconomic Performance before
81
Overview
123
The Interaction between Inflation and Monetary
134
Slowing Down Devaluation Monetary Accommodation
148
Foreign Trade Shocks and the Dynamics
169
Overview
187
Evidence
207
Overview
255
Relative Price Variability and Inflation in
273
Relative Price Variability under High Inflation
291
Overview
297
Index
325
Copyright

Common terms and phrases

About the author (1993)

Leonardo Leiderman is associate professor of economics at Tel-Aviv University. He is also a senior advisor for policy and research for the Bank of Israel and has served as a consultant to the World Bank and the International Monetary Fund.

Bibliographic information