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

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 IsraelвЂTMs 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. An analysis of the structural reforms that transformed Israel's economy from one dominated by government intervention to a market-oriented, open economy.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. The Obstacle Course To A Market Economy In Israel / Avi Ben-bassat -- Reducing The Relative Size Of Government In Israel After 1985 / Michel Strawczynski And Joseph Zeira -- A Monetary Labyrinth: Instruments And The Conduct Of Monetary Policy In Israel, 1987-1998 / Joseph Djivre And Daniel Tsiddon -- The Disinflation Process In Israel In The Past Decade / Nissan Liviatan And Nathan Sussman -- Israeli Inflation From An International Perspective / Stanley Fischer And David W.h. Orsmond -- Reform In The Israeli Financial System And The Flow Of Funds Of Publicly Traded Manufacturing Firms / Asher A. Blass And Oved Yosha -- Pension Fund Reform / Avia Spivak -- Liberalization In The Capital Account Of The Balance Of Payments / Daniel Gottlieb And Mario I. Blejer -- The Import-liberalization And Abolition Of Devaluation Substitutes Policy: Implications For The Israeli Economy / Yoram Gabai And Rafael Rob -- Structural Changes In The Israeli Public Utilities: The Reform That Never Was / Reuben Gronau -- Integration Of Immigrants From The Former Soviet Union In The Israeli Labor Market / Zvi Eckstein And Yoran Weiss -- The Flexibility Of The Israeli Labor Market / Yael Artstein -- Capital Accumulation, Productivity, And Growth In The Israeli Economy / Zvi Hercowitz -- Structural Change And The Emergence Of Israel's High-tech Sector / Moshe Justman -- The Rise Of Earning Inequality / Momi Dahan. Edited By Avi Ben-bassat. The Maurice Falk Institute For Economic Research In Israel. Includes Bibliographical References And Index. 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 reform 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, labour 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 neighbours, 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."--BOOK JACKET.