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From Galloping Inflation to Price Stability in Steps: Israel 1985–2013

Rafi Melnick () and Till Strohsal

No SFB649DP2015-009, SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649

Abstract: After the introduction of a stabilization program Israeli inflation decreased from 400% in 1985 to 2% in 2013. This paper analyzes how the remarkable transition process of Israel’s disinflation took place. We reinforce the existing hypothesis that inflationmoved in distinct steps characterized by constant levels with short-lived fluctuations around them. Multiple endogenous breakpoint tests provide strong empirical evidence in favor of our claim. We find that the disinflation process is defined by three clear steps of high, medium and low inflation. The break dates are in line with major economic events that constitute the end and the beginning of each disinflation step.

Keywords: Inflation; Disinflation Steps; Multiple Breakpoint Tests; Inflation Targeting (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2015-02
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