Two Middle Eastern Inflations: Israel and Turkey 1980-2001

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Abstract: This paper examines the political economy of inflation control in Turkey between 1980 and 2001 and Israel between 1980 and 1985. These two economies, the most industrialized and open in the Middle East, suffered inflation that at times exceeded 100 per cent a year in the period after 1980. In Israel inflation rose from 20 to 30 per cent in the mid-1970s to 100–120 per cent in the early 1980s and to 500 per cent at an annual rate in the first half of 1985. The July 1985 stabilization programme reduced it to an annual rate of 20 per cent in the second half of 1985 and was hailed as a unique success. In Turkey the inflation rate was similar to that in industrial countries until the 1970s when it accelerated and reached 110 per cent in 1980. In the early 1980s it averaged 40 per cent but it jumped to over 80 per cent in 1988–1989. After reaching 106 per cent in 1994, inflation fell to a low of 35 per cent in 1999, but rose sharply afterwards as a result of a further crisis.