## The Israeli Structural Model

_IMF Working Papers, October 24, 2025_

## Source details

**Canonical URL:** [The Israeli Structural Model](https://www.imf.org/en/publications/wp/issues/2025/10/24/the-israeli-structural-model-571352)

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## Bibliographic details
- Authors: Daniel Baksa, Yotam Peterfreund, Nadav Podoler, Ivy Sabuga, Tanya Slobodnitsky, Luis-Felipe Zanna
- Published: October 24, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229028622.001

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### Model description
- The ISM is a New-Keynesian Dynamic Stochastic General Equilibrium (DSGE) model tailored to reflect key characteristics of the Israeli economy.
- Key model components:
  - Diverse consumer saving behaviors and labor skills.
  - A dynamic high-tech (HT) sector.
  - International trade and capital integration.
  - Comprehensive fiscal components.
- The ISM is integrated into the Ministry of Finance’s (MOF) Forecasting and Policy Analysis System (FPAS) as a macroeconomic policy scenario analysis tool.

### Policy use and scenarios evaluated
- The paper illustrates ISM’s policy use by evaluating strategies for utilizing additional government revenue generated from the HT sector boom in 2022.
- Three policy options compared:
  - Accelerated public debt reduction.
  - Redistribution through transfers.
  - Increased public investment.

### Key findings and comparative outcomes
- Main comparative conclusion:
  - Increased public investment is identified as the most beneficial strategy in the aftermath of the COVID-19 pandemic.
- Effects of increased public investment (as found in the paper):
  - Accelerates GDP's convergence to its trend.
  - Reduces public debt to GDP ratios.
  - Mitigates real appreciation.
  - Mitigates the impact on the most vulnerable population.
- Comparative implications of other options (summarized from analysis):
  - Accelerated public debt reduction and redistribution through transfers are evaluated but found less effective than increased public investment on the listed macroeconomic objectives.

### Subject and keywords
- Subject areas: Commodities, Consumption, COVID-19, Health, National accounts, Oil, Public debt.
- Keywords: Consumption, COVID-19, DSGE Model, Fiscal Policy, Forecasting and Policy Analysis System, Global, IMF working papers, Ism's policy use, Israel, Monetary Policy, monetary policy Paramaters, Oil, policy option, transfer Policy.

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2025/10/24/the-israeli-structural-model-571352_