IMF Working Papers

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

By Assaf Razin, Efraim Sadka

April 1, 1996

Preview Citation

Format: Chicago

Assaf Razin, and Efraim Sadka. Fiscal Balance During Inflation, Disinflation, and Immigration: Policy Lessons, (USA: International Monetary Fund, 1996) accessed December 26, 2024
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.

Subject: Government debt management, Income, Inflation, National accounts, Prices, Public debt, Public financial management (PFM), Tax incidence, Tax policy

Keywords: Deficit, Disinflation, Disinflation program, Exchange rate, Government debt management, Government savings, High-inflation period, Income, Inflation, Inflation expectation, Inflation path, Inflation process, Inflation stabilization, Nominal capital, Nominal rate, Real rate of interest, Stopping inflation, Tax incidence, Tax liability, WP

Publication Details

  • Pages:

    44

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1996/033

  • Stock No:

    WPIEA0331996

  • ISBN:

    9781451979312

  • ISSN:

    1018-5941

Notes

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

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