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 debt crisis of 1982 caused serious economic disruptions in most developing countries. Reform, Recovery, and Growth explains why some of these countries have recovered from the debt crisis, while more than a decade later others continue to stagnate. Among the questions addressed are: What are...

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...