Ben-Zion Zilberfarb

Inflation and Its Unpredictability--Theory and Empirical Evidence

The effect of inflation on its unpredictability is theoretically ambiguous. Arthur M. Okun (1971) and Milton Friedman (1977) suggest that the effect is positive. However, a negative effect may exist if higher inflation induces the relevant economic agents to invest more in generating accurate predictions. This paper provides a theoretical model to analyze these opposing arguments and specifies the conditions under which a positive effect exists. New survey data regarding inflationary expectations in Israel are used to empirically examine the model. The data, which allow single hypothesis testing of the relationship, reveal a positive effect only in periods of high inflation, indicating a possible threshold effect. Copyright 1993 by Ohio State University Press.

The energy-GDP relationship in developing countries: Empirical evidence and stability tests

Abstract The elasticity of energy consumption with respect to GDP is an important element in projecting energy needs in economic development. This study uses cross section and pooled cross section time series data to find that the elasticity of energy consumption with respect to GDP in developing countries is in the neighbourhood of 1.35, and significantly above one. Over the period covered, 1970 to 1976, the relationships appear to have remained stable. There are significant differences between areas of the world, but the differences in the elasticities between different continents are not large

The effect of automated teller machines on demand deposits: An empirical analysis

The banking system has experienced rapid and significant technological changes in recent years, including automated teller machines (ATMs), automated clearing houses, point of sale systems, telephone transfers, automatic billpayer accounts, and credit cards. The total effect of these innovations on money demand has been the subject of some empirical research; however, the individual effect of most of these innovations has not been estimated. This article attempts to partially bridge the gap in the empirical literature by providing empirical evidence relating to the effect of ATMs on demand deposits.

Interest rate determination in a high inflation economy

Abstract This study examines the importance of the liquidity effect, inflation uncertainty, and supply shocks in determining interest rates in a high inflation economy (Israel). The results show that a significant liquidity effect exists when it is measured by a broad definition of money. The vanishing liquidity effect, found in studies of the U.S., may be the result of the use of M, to measure it. There is some support for the hypothesis that the strength of the liquidity effect is negatively related to the level of inflation. Interest rates are negatively (and significantly) affected by inflation uncertainty, and positively affected by supply shocks.

From Socialism to Free Market – The Israeli Economy, 1948–2003

This study describes the transition of the Israeli economy from a socialist to a free market economy. It is argued that the transition took place not because of ideological changes, but due to a pragmatic economic approach that policy makers had adopted. Indeed, the one and only attempt to move to a free market economy (1977), on the basis of economic ideology, did fail. In as much as there was an ideological debate between different schools of thought about the right economic regime, that debate was over in 1985. On the verge of economic collapse, brought about by high inflation rates, economic reality dictated an anti-inflation policy based on the reduction of the government involvement in the economy and a move to greater freedom of markets. The collapse of the former Soviet Union gave further support and legitimacy to this policy. Thus, at the beginning of the new millennium, the Israeli economy is moving towards less government involvement and a greater role for the private sector. The ability to adhere to this ideology depends on resuming economic growth, which will be the source for additional tax revenues and jobs. This will alleviate the growing tension between the desire to maintain a high level of social and welfare expenditures and the desire to reduce the level of government involvement in the economy.

From Boom to Bust: The Israeli Economy 1990–2003

The recent history of the Israeli economy is a story of boom to bust. Rapid growth in the first half of the 1990s was followed by moderate growth in the second half of the decade and deep recession in recent years, as illustrated in Table 1 and Figure 1. The purpose of this paper is to examine the reasons for the macroeconomic performance of the Israeli economy since the beginning of the 1990s and to try to draw some conclusions about the forces that will affect future developments in the Israeli economy. The second section provides a brief description of the period of rapid growth between 1990 and 1995. The shift to moderate growth in the 1996–2000 period is described and analyzed in the third section. The recession of recent years (2001–2003) is discussed in section four, followed by some forecasts regarding the road ahead.