Israel 1983: A bout of unpleasant monetarist arithmetic?
This paper claims that anticipations of a promised massive future government bailout of owners of fallen bank shares suddenly caused a big jump in inflation in Israel in October 1983. That month, the government promised that four or five years later it would compensate innocent people for the fall in the value of their bank shares. We reason that the public believed that promise, that it understood that the public debt must jump, and further that the public anticipated that the government would finance that debt via a future monetary expansion. That sparked an immediate jump in inflation via the unpleasant monetarist arithmetic of Sargent and Wallace (1981). (Copyright: Elsevier)
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Volume (Year): 14 (2011)
Issue (Month): 3 (July)
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References listed on IDEAS
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- Thomas J. Sargent & Noah Williams & Tao Zha, 2006.
"The conquest of South American inflation,"
FRB Atlanta Working Paper
2006-20, Federal Reserve Bank of Atlanta.
- Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
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"The Dynamics of Inflation with Constant Deficit under Expected Regime Change,"
Royal Economic Society, vol. 100(403), pages 1245-1260, December.
- Bental, B. & Eckstein, Z., 1988. "The Dynamics Of Inflation With Constant Deficit Under Expected Regime Change," Papers 35-88, Tel Aviv.
- Allan Drazen & Elhanan Helpman, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 835-855.
- Sussman, Oren, 1992. "Financial Liberalization: The Israeli Experience," Oxford Economic Papers, Oxford University Press, vol. 44(3), pages 387-402, July.
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