Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148875
Authors: 
Melnick, Rafi
Strohsal, Till
Year of Publication: 
2016
Series/Report no.: 
SFB 649 Discussion Paper 2016-039
Abstract: 
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.
Subjects: 
Phillips Curve
Expected Inflation
Opportunistic Disinflation
Multiple Breakpoint Tests
Inflation Targeting
JEL: 
E31
E52
E58
C22
Document Type: 
Working Paper

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