Working Paper: NBER ID: w23061
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’s 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: inflation; globalization; economic stabilization; Israel; monetary policy
JEL Codes: E0; F0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| implementation of the stabilization program (E63) | decrease in inflation (E31) |
| implementation of the stabilization program (E63) | increase in real economic activity (O49) |
| globalization and institutional reforms (F68) | convergence of inflation rates to advanced economies (E31) |
| political consensus among stakeholders (D70) | effectiveness of stabilization measures (E63) |
| stabilization measures (E63) | decrease in inflation (E31) |
| institutional changes (O17) | stabilization of the Israeli economy (E63) |