Bank of Israel paper underlines importance of fiscal discipline


A research paper, published by the Bank of Israel on July 17, compares Israel's experience of two crises – between 2001–03 and the most recent financial crisis – suggesting reasons for the two different economic outcomes.

The authors, Kobi Braude and Karnit Flug, show that the government's high level of debt prior to the crisis in 2001 caused counter-cyclical policies to fail, as lack of market confidence pushed up bond yields. This, the authors say, in turn forced the Bank of Israel to raise

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