While the Israeli stabilization of 1985 has received significant attention in previous work, much less is known about the process of financial opening and liberalization which began shortly afterwards. In contrast to the disinflation policy of 1985, the process of financial liberalization that...

This paper derives and tests the restrictions implied by an optimizing model of currency substitution under nonexpected utility using quarterly data for Israel from 1978 to 1988. We find that the elasticity of intertemporal substitution is less than one, the elasticity of currency substitution...

The purpose of this paper is to provide a framework for the analysis of policy-makers' choices regarding unilateral exchange rate bands. Exchange rate bands are viewed as the outcome of an optimization problem by a policy-maker whose objective function weighs the level of the real exchange rate...

This paper presents a new set of empirical regularities on the link between interest rates, money supply announcements and monetary base announcements. Among the main findings reported are: (i) unexpected increases in the announced monetary base have a significantly positive effect on interest...