Working Paper: CEPR ID: DP997
Authors: Leonardo Leiderman; Gil Butman
Abstract: While the Israeli stabilization of 1985 has received significant attention in previous work, much less is known about the process of financial opening and liberalization which began shortly afterwards. In contrast to the disinflation policy of 1985, the process of financial liberalization that started in 1987 proceeded in a slow and gradual mode. No official announcement was made about either the precise policy measures or the timetable for the process. As a result of these and other political economy factors, the process has not been completed and there are no strong incentives for policy-makers to further deepen the reforms at the present time. This paper discusses the main elements of financial liberalization in Israel and draws implications that could be relevant for financial opening policies in other countries.
Keywords: liberalization; financial opening; financial reforms; gradualism
JEL Codes: E52; F41; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stabilization program of 1985 (E65) | financial reform (G28) |
| fiscal balance (E62) | financial reform (G28) |
| disinflation (E31) | financial reform (G28) |
| stabilization (E63) | financial deregulation (G28) |
| gradualism (O40) | success of financial liberalization (F30) |
| lack of official commitment to a timeline (E60) | delays in reform process (D73) |
| gradual reduction of government intervention (O25) | competitive environment for credit allocation (G21) |
| less gradual approach (B52) | substantial progress toward financial opening (F30) |