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Israel's stabilization program

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  • Liviatan, Nissan

Abstract

In order to combat inflation, Israel launched a stabilization program in July 1985 which resulted in inflation decreasing to a low 20 percent annually as compared with more than 400 percent in 1984. What contributed to this decline? This paper attempts to analyze the major factors which made the transition to low inflation possible. It deals with such issues as the role of U.S. aid and of domestic fiscal adjustment, of monetary and exchange rate policies and of the change in the rules of the game concerning government-labor interactions. The paper focuses on the evaluation of the stabilization program from the 1987 perspective and examines the evolution of the disinflationary policies in the course of the program. Although Israel has obviously made strides in correcting inflation, several problems remain for the economy. The final section of the paper deals with these issues and the policy dilemmas which face the government.

Suggested Citation

  • Liviatan, Nissan, 1988. "Israel's stabilization program," Policy Research Working Paper Series 91, The World Bank.
    • Handle: RePEc:wbk:wbrwps:91
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    References listed on IDEAS

    as
    1. Maurice Obstfeld, 1985. "The Capital Inflows Problem Revisited: A Stylized Model of Southern Cone Disinflation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 605-625.
    2. Rudiger Dornbusch, 1985. "Inflation, Exchange Rates and Stabilization," NBER Working Papers 1739, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ades, Alberto F. & Kiguel, Miguel & Liviatan, Nissan, 1993. "Exchange rate based stabilization : tales from Europe and Latin America," Policy Research Working Paper Series 1087, The World Bank.
    2. Coricelli, Fabrizio & Rocha, Roberto de Rezende, 1991. "Stabilization programs in Eastern Europe : a comparative analysis of the Polish and Yugoslav programs of 1990," Policy Research Working Paper Series 732, The World Bank.

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