The Fight over Stabilization and the Structural Adjustment Process, 1985–1991

Michael Bruno

in Crisis, Stabilization, and Economic Reform

Published in print August 1993 | ISBN: 9780198286639
Published online September 2006 | e-ISBN: 9780191603839 | DOI:

Series: Clarendon Lectures in Economics

 The Fight over Stabilization and the Structural Adjustment Process, 1985–1991

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This chapter analyzes the efforts to establish the credibility of both fiscal and nominal anchors in the aftermath of sharp stabilization as well as the ongoing structural reform process. It begins with an analysis of the initial stabilization phase, and then considers various alternative interpretations of the business-cycle phenomenon. It defends the real fundamentals, namely the establishment of credible fiscal discipline. This is followed by an analysis of the struggle led mainly by the Bank of Israel, over the defence of the nominal anchor, including the evolution of the exchange-rate regime in the aftermath of stabilization, and the gradual and costly learning process it entailed in wage and labour-market behaviour. The successful introduction and gradual phase-out of price controls, financial restructuring in ailing enterprises, financial market reform, and structural reform in the real economy are discussed.

Keywords: Israel; structural reform; financial reform; restructuring

Chapter.  16804 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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