Israel

Israel progressed from a very poorly functioning framework (and hyperinflation) in the 1980s by way of a crawling exchange rate to inflation targeting (with formal central bank independence coming particularly late in the process).

Years Targets and attainment Classification
1974-85 unsuccessful attempts to stabilise currency (versus USD then basket then USD), then from 1977 float with recurring depreciations; high monetary growth and no formal targets, widespread indexation, recurring fiscal dominance, ending in hyperinflation in 1984-5 unstructured discretion UD
1986-91 serious stabilisation efforts from July 1985 (including currency reform and ‘no printing’ law) but continuing devaluations versus basket of major currencies loosely structured discretion LSD
1992-94 preannounced exchange rate crawl intended to be consistent with informal inflation target; monetary operations increasingly focused on discount rate exchange rate with inflation targeting ERwIT
1995-96 exchange rate bands widened, informal inflation targets met inflation with exchange rate targeting IwERT
1997-2003 exchange rate bands widening continuously, declining narrow formal inflation targets undershot 3 years and overshot 1 year out of 7 loose converging inflation targeting LCIT
2004-14 static inflation targets met 9 years and nearly met 2 years out of 11; exchange rate bands, already so wide they were not relevant, scrapped 2005; some changes to inflation targeting procedures; significant forex purchases to limit appreciation 2008-11; central bank finally made independent from 2010 after long delays full inflation targeting FIT

Selected IMF references: SR 1977 p10; RED 1984 p44; RED 1985 p56; RED 1987 pp58-60, 81, 105; SR 1987 pp9-10; RED 1989 p49; SR 1991 pp11-12; RED 1993 pp16-18, 39; SR 1996 pp10-12; SR 1998 pp21-4; SISA 1999 pp20-22; SISA 2000 pp57-8; SR 2000 pp22-5; SR 2001 pp16-17; SI 2005 chI; SR 2008 p8; SR 2010 pp18, 23, 27; SIP 2012 chIII; SR 2014 p9.

Additional source: Barkai and Liviatan (2007); Bank of Israel (2007).

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