Disinflation and the Phillips Curve: Israel 1986-2015

Arbeitspapier

A Phillips Curve (PC) framework is utilized to study the challenging post-1985 disinflation process in Israel. The estimated PC is stable and has forecasting power. Based on endogenous structural break tests we find that actual and expected inflation are co-breaking. We argue that the step-like development of inflation is in line with shocks and monetary policy that changed inflationary expectations. The disinflation process was long, and a long-term commitment by both the Central Bank and the government was required. Credibility was achieved gradually and the transition from the last step of 10% to 2% inflation was accomplished by introducing an inflation targeting regime.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2016-039

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Monetary Policy ; Central Banks and Their Policies ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• Subject: Phillips Curve ; Expected Inflation ; Opportunistic Disinflation ; Multiple Breakpoint Tests ; Inflation Targeting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Melnick, Rafi ; Strohsal, Till
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/148875