A model for rate setting in Israel
A new paper by the Bank of Israel describes a basic structural VAR system for the Israeli economy, analyses its characteristics and evaluates its forecasting performance.
In addition to the variables that usually appear in such models - activity, the exchange rate, the central bank interest rate and inflation - the model presented in this paper incorporates inflation expectations derived from the capital market. It was found that this improves the model. It was further found that the exogenous
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