Exchange-rate flexibility,inflation, and structural change: Israel Under Alternative Regimes

The paper analyses the evolution of the Israeli exchange rate regime from the application of large discrete devaluations interspersed with gradual adjustments of export subsidies and import tariffs, through the adoption of a crawling peg (1975), and culminating in exchange decontrol and a float (1977). The main issues analysed in greater detail are the problem of maintaining an export-biased trade strategy, the role of devaluations in the inflationary process and the effect of alternative exchange rate regimes on expectations and capital-account transactions.