Fiscal Balance During Inflation, Disinflation, and Immigration: Policy Lessons
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. 1996/033
Subject:
Government debt management Income Inflation National accounts Prices Public debt Public financial management (PFM) Tax incidence Tax policy
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
Pages:
44
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