Fiscal Balance During Inflation, Disinflation, and Immigration : Policy Lessons

Author/Editor:

Assaf Razin ; Efraim Sadka

Publication Date:

April 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper provides an overview of the role of the fiscal imbalances and the ensuing public debt in explaining major episodes in Israel’s recent economic developments. The main conclusions from the Israeli budgetary developments may have more general validity: (a) deficits lead to inflation and stopping inflation requires elimination of deficits; (b) a major effect of inflation is a large shift of the tax burden from capital to labor; and (c) shocks to labor supply, such as massive labor inflow through immigration, can be absorbed without worsening government finances, when the labor and the housing markets are sufficiently flexible.

Series:

Working Paper No. 96/33

Subject:

Notes:

Messrs. Razin and Sadka were visiting professors of economics at Tel Aviv University.

English

Publication Date:

April 1, 1996

ISBN/ISSN:

9781451979312/1018-5941

Stock No:

WPIEA0331996

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

44

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