From Deficits to Surpluses: Israel’s Current Account Reversal

doi:10.1017/9781108907620.006

5 - From Deficits to Surpluses: Israel’s Current Account Reversal

from Part I - Government Policy and Macroeconomic Developments

Published online by Cambridge University Press: 04 February 2021

Leonardo Leiderman and

Edited by

Reuben Gronau and

Avi Ben-Bassat: Affiliation:
Hebrew University of Jerusalem
Reuben Gronau: Affiliation:
Hebrew University of Jerusalem
Asaf Zussman: Affiliation:
Hebrew University of Jerusalem

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Summary

Israel’s balance of payments changed dramatically between 1995 and 2015. These years mark a period of transition from deficits to surpluses in the current account. Among the factors behind this reversal were a sound macroeconomic policy, the global boom in high-tech industries, and the discovery of natural gas on Israel’s coast in the Mediterranean Sea. The transition reflects an increase in the national saving rate and a decline in the rate of national investment. While these important changes were taking place, the financial account of the balance of payments also shifted due to various structural changes, such as the completion of foreign exchange market liberalization and a shift to a floating exchange rate regime. Owing to the foregoing developments, Israel has become a net lender to the rest of the world. In this chapter we analyze and quantify these major changes and assess the extent to which the existence of current account surpluses be considered as a sustainable phenomenon.

Keywords

Balance of payments current account capital flows exchange rate

Type: Chapter
Information: The Israeli Economy, 1995–2017
Light and Shadow in a Market Economy
, pp. 138 - 167

DOI: https://doi.org/10.1017/9781108907620.006 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2021

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