The Status Of Israel's Central Bank Has Evolved(1948-2005)

After the founding of the country,the status of the Central Bank of Israel has been upgraded step by step.From the initial low-level branch of the Ministry of Finance,it gradually became a same-level organization with the Ministry of Finance.The executors of the fiscal policy became the makers and played a pivotal role in the development of Israel's economy.In Israel's pre-establishment nationalist movement,Jewish immigrants started a collective farm life in order to gain a foothold in Palestine and established the Labour Party during this period.In 1948,after the founding of Israel,the Socialist tendency of the Labour Party took power and the threat of war,Israel had to follow the highly centralized economic system of the former Soviet Union and implement a planned economy.The planned economy has strengthened Israel's national defense construction to a certain extent,but its drawbacks are also obvious.The Central Bank of Israel has become a low-level branch of the Ministry of Finance and has only become an executor in the country's economic construction,rather than a fiscal policy maker.In the early 1970 s,the financial system quietly changed in capitalist countries.At the time,because the Western capitalist countries were generally influenced by Keynesianism,the central goal of the national economy was only economic growth and full employment,and it was too dependent on the state's direct intervention in the economic process.In this context,a "stagflation crisis" has occurred,the Bretton Woods has collapsed,and the neo-liberal economy has become prevalent.In Israel,due to the government's massive expenditure on national defense construction,the domestic economy has experienced a serious recession,which is characterized by high inflation rate,lack of vitality in the market,and low status of the Israeli central bank,which makes it difficult to macroeconomically regulate the national economy.Against this backdrop,economists in Israel began to call on the government to shift its focus from national defense construction to economic construction in order to reduce domestic high inflation and stabilize prices.The United States,Israel's largest trading partner,does not want Israel's economic crisis to reach the United States.The White House has pressured Israel to reverse the economic downturn.It has sent a team of economists to evaluate Israel's economic situation and proposed changesincluding the change of the Israeli central government.A series of reform programs including the status of the bank.The second half of the 1980 s was a crucial period for the reform of the central bank,which completely changed the status of the central bank in national economic construction.The role of the bank is also closely following the wave of domestic neo-liberal reforms and entering the modern financial management system.The Central Bank of Israel has become the core force of the country's overall macroeconomic management.The most important turning point was the amendment of the Israeli Banking Act of 1985,which legally guaranteed the independence of the Central Bank of Israel in formulating monetary policy and adjusting interest rates.After the reform,the Central Bank of Israel implemented the reform of interest rate policy,changed from a fixed to a floating exchange rate,and adopted an inflation targeting system to stabilize Israel's economic development.After that,the Israeli central bank implemented a series of reforms in the foreign exchange market.Israel has integrated into the process of economic globalization.