Working Paper: CEPR ID: DP13701
Authors: Assaf Razin
Abstract: This essay offers an economic-history perspective of the long struggle towards macroeconomic stability. The paper is a broad analytical overview of major exogenous shocks and shifts in macroeconomic policy and institutions in Israel since the 1977-1985 great inflation through the global financial crisis and the effects of those shifts on long term growth, inflation, the business cycle, the Phillips curve and related economic developments. The paper will discuss three main issues. The first one on the inflation crisis focuses on the 1985 stabilization and on its impact on subsequent reform of monetary institutions. The second discusses the impact of globalization on growth, inflation and the Phillips curve. The third contains a discussion of the reasons for the relatively good performance of Israel during the crisis, including foreign exchange market intervention.
Keywords: macroeconomic stability; inflation; globalization; economic history
JEL Codes: E0; F0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 1985 stabilization program (E65) | reduction in inflation (E31) |
| 1985 stabilization program (E65) | increase in real economic activity (O49) |
| globalization (F60) | inflation dynamics (E31) |
| globalization (F60) | growth dynamics (O41) |
| prior financial, fiscal, and monetary reforms (E69) | resilience to external shocks (F41) |