Working Paper: CEPR ID: DP11787
Authors: Assaf Razin
Abstract: The paper gives an economic-history perspective of the long struggle with Inflation. It covers the early acceleration to three-digit levels, lasting 8 years; The stabilization program, based on political backing triggered sharp fall in inflationary expectation, and consequently to sharp inflation reduction to two- digit levels; The convergence to the advanced countries’ levels during the “great Moderation”; And Israel’ resistance to the deflation-depression forces that the 2008 crisis created. The emphasis is on the forces of globalization and the building of institutions, political, regulatory, financial, budget design, and monetary, which helped stabilize prices and output.
Keywords: hyperinflation; deflation; depression forces; stabilization
JEL Codes: E00; E6; F3; F38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stabilization program (E63) | reduction in inflation rates (E31) |
| political backing (D72) | reduction in inflation rates (E31) |
| globalization + robust institutions (F68) | stabilization of prices and output (E64) |
| lack of proper financial regulation + accommodative monetary policies (F65) | hyperinflation (E31) |
| stabilization program + globalization (F68) | convergence of inflation rates to advanced economies (E31) |