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The Israeli Economy, 1985-1998: From Government Intervention to Market Economics

Editor

Listed:
  • Avi Ben-Bassat
    ()

    (Hebrew University of Jerusalem)

Abstract

From 1973 to 1985, the Israeli economy suffered a deep crisis: the growth rate declined, foreign debt increased, and inflation soared to annual rates of a few hundred percent. This book analyzes the structural reforms initiated between 1985 and 1998 that transformed the Israeli economy from one of heavy government intervention to a market-oriented, open economy. The reforms introduced fiscal discipline, increased central bank independence, and reduced government intervention in capital, labor, and financial markets. Also, competition was fostered in monopoly-controlled markets. The results of these reforms include, among others: a decline from 77 percent to 55 percent in the government expenditure portion of the gross domestic product, a decline from 65 percent of credit volume to 5 percent in government involvement in directing credit, and almost complete elimination of the tight control of the foreign-exchange market. These reforms, together with the mass migration into Israel from the former Soviet Union and the peace process with Israel's neighbors, accelerated economic growth, particularly in the business sector. Topics discussed include the impact of macroeconomic policy and structural reforms on growth, employment, inflation, balance of payments, and the rapid expansion of high-tech industry. The book also examines the consequent increase in income inequality and related problems.

Suggested Citation

  • Avi Ben-Bassat (ed.), 2002. "The Israeli Economy, 1985-1998: From Government Intervention to Market Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025183, January.
  • Handle: RePEc:mtp:titles:0262025183
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    Citations

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    Cited by:

    1. Francisco J. Buera & Yongseok Shin, 2017. "Productivity Growth and Capital Flows: The Dynamics of Reforms," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(3), pages 147-185, July.
    2. M Daniele Paserman, 2013. "Do high-skill immigrants raise productivity? Evidence from Israeli manufacturing firms, 1990-1999," IZA Journal of Migration, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-31, December.
    3. Zvi Eckstein & Tamar Ramot-Nyska, 2008. "Twenty years of financial liberalisation in Israel: 1987–2007," BIS Papers chapters,in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 289-304 Bank for International Settlements.

    More about this item

    Keywords

    israel; government intervention; macroeconomic policy; income inequality;

    JEL classification:

    • N0 - Economic History - - General

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