cmsdtp 2002 02010005 ppt Inflation Targeting Disinflation Exchange-Rate Policies

cmsdtp20022010005. ppt Inflation Targeting, Disinflation, & Exchange-Rate Policies Jacob A. Frenkel Chairman, JP Morgan International Former Governor, Bank of Israel The New Bank of Israel Conference Honoring Stanley Fischer Jerusalem, June 18, 2013 0 3/15/2018 8: 13 PM

cmsdtp20022010005. ppt The Rate of Inflation Date: January 2002 Note: data for 2001 refers to November 2001 1 3/15/2018 8: 13 PM

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Current Account Deficit as a Percent of GDP Date: January 2002 2

cmsdtp20022010005. ppt Foreign Exchange Transactions: Capital Versus Trade Flows* * The sum above the columns indicates average cumulative change in transactions p. a. ** Including Unilateral transfers Date: November 2001 3 3/15/2018 8: 13 PM

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Shekel Exchange Rate vs Basket & USD (1) July 1985 - May 1989 2. 1 band 3% 2. 0 Adjustment of 8%v. basket Shekels 1. 9 1. 8 3% Basket 10% 1. 7 US$ 1. 6 1. 5 1. 4 1. 3 1. 2 III IV 1985 I II IV I 1986 II III 1987 4 IV I II III 1988 IV I II 1989

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Shekel Exchange Rate Basket (2) January 1989 - March 1992 Shift in band mid-point: NIS 10% 2. 40 Shift in band mid-point: 2. 30 band 6% 2. 20 Shift in band mid-point: 2. 10 band -5% + 3% 6% band 2. 00 +5% - 3% + 3% - 3% 1. 90 1. 80 I II IV 1989 I II III 1990 5 IV

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Shekel Exchange Rate versus Basket (3) March 1990 - June 1992 NIS Shift in band mid-point: 2. 70 Shift in band mid-point: 2. 60 5% 10% 2. 50 2. 40 +5% band 2. 30 band -5% +5% 2. 20 -5% 2. 10 2. 00 1. 90 1. 80 II IV I 1990 II III 1991 6 IV I II 1992

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Shekel Exchange Rate versus the Basket (4) Early 1992 - June 1994 3. 6 6% slope 3. 4 +5% 8% slope 3. 2 Band with 9%slope 3. 0 -5% +5% -5% 2. 8 +5% -5% 2. 6 2. 4 I II IV I 1992 II III 1993 Date: April 2001 7 IV I II III 1994 IV

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Shekel Exchange Rate versus Basket (5) July 1994 - January 2001 5. 4 6% slope 4. 9 4. 4 6% slope 3. 9 +7% +5% 3. 4 2% slope 4% slope -7% -5% 2. 9 III IV I II III 1995 IV I II IV I 1996 II III 1997 Date: April 2001 8 IV I II III 1999 IV I II III 2000 IV I

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Shekel Exchange Rate versus Basket (6) January 1997 - January 2002 NIS per unit of basket 5. 5 Slope 6% 44. 0% 5. 0 4. 5 Slope 6% +7% 4. 0 -7% Slope 2% Slope 4% Slope 6% Slope 0% 3. 5 Jan-97 Date: December 2001 Jan - 98 Jan-99 9 Jan-00 Jan -01 Jan-02

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Trade in Options and Futures as a Share of Total Foreign Exchange Transactions 25% 20% Exponential Trend 15% 10% 5% Moving Average 0% Jul - 94 Jan - 95 Jul - 95 Jan - 96 Jul - 96 (incl. TA stock exchange Date: 28 July 1999 10 Jan - 97 Jul - 97 Jan - 98 Jul - 98 Jan - 99 Jul - 99

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Inflation Expectations Indicators: Capital Markets 8. 4 Percent 7. 7 3. 3 Ave. Forecasters Date: January 2002 11 2. 7

cmsdtp20022010005. ppt Change in the Monthly CPI Ave. 7/97 to 8/98: 0. 3% Date: November 2001 Ave. 12/98 to 11/01: 0. 1% 12 3/15/2018 8: 13 PM

cmsdtp20022010005. ppt Change in the Annual CPI * Note: data for 2001 refers to November 2001 Date: January 2002 13 3/15/2018 8: 13 PM

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Inflation Rate* and the Inflation Target Percent 14. 5 11. 0 10. 0 8. 0 7. 0 4. 0 3. 0 * Previous 12 months Date: December 2001 14 3. 5 2. 5 3. 0 2. 0 3. 0 1. 0

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM The Bank of Israel Monthly Interest Rate and Inflation Expectations cent Bank of Israel Interest Rate Inflation Expectations Date: December 2001 15

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Bank of Israel Interest Rate In Nominal and Expected Real Terms Percent Bo. I Nominal Interest Rate Expected Real Interest Rate Expected real interest rate = Effective Bank of Israel interest rate adjusted for inflation expectations Date: December 2001 16

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM NIS Depreciation & CPI Differential with US Depreciation Inflation Differential Cumulative since January 1997 Date: November 2001 17

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM Israel’s International Credit Ratings Moody’s Institutional Investor BBB- BBB+ BBB S&P Date: November 2001 18 A 2 A 3 A-

cmsdtp20022010005. ppt 3/15/2018 8: 13 PM International Credit Rating and Inflation Israel's rating/sample average 1986 to 1999 1. 6 1. 5 1. 4 1999 1. 3 1. 2 1997 1998 1995 1996 1994 1993 1. 1 1992 1 1988 0. 9 1990 1987 0. 8 6 11 Inflation Source: Institutional Investor, semi-annual survey Increase = improvement relative to sample (about 100 countries) Date: January 2000 19 1986 0. 7 1 1991 16 21

cmsdtp20022010005. ppt Growth Rate of GDP Date: April 2001 20 3/15/2018 8: 13 PM