engines for growth prof. zvi eckstein, deputy governor, bank of israel 2008 herzliya conference
TRANSCRIPT
Engines for Growth
Prof. Zvi Eckstein, Deputy Governor, Bank of Israel
2008 Herzliya Conference
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1922
1926
1930
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1946
1950
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1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
%
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NIS
(Tho
usan
ds, 2
000
pric
es)
Ratio of Israel/US GDP (left)
Real per capita GDP in Israel (right)
The Trend of GDP over time
SOURCE: Eckstein & Tsiddon (2004), Heston, Summers & Aten (2006), CBS.Forecast for 2007 and 2008
The main reasons for lower output :
Employment: 10% lower.
Productivity per worker: 25% lower.
GDP Growth and the Unemployment Rate (percent)
-2
0
2
4
6
8
10
12
2000
2001
2002
2003
2004
2005
2006
2007
*
2008
*
GDP growth Unemployment rate*forecast Source: CBS and BOI
Gross Public Debt (percent of GDP)
81
199
284
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50
100
150
200
250
300
*forecast Source: CBS and BOI
Public Expenditure and Public Deficit(Percent of GDP)
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%
-5
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5
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15
20
25
%
Total public expenditure Public deficit (right scale)
Source: CBS and BOI *forecast
Inflation Expectations and Inflation Target
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1
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7
2001 2002 2003 2004 2005 2006 2007
%
Expected breakeven inflation (1yr.)Inflation targetExpected breakeven inflation (10yr.)
Source: CBS and BOI
Microeconomic Aspects of Growth
x Employment rate Productivity = GDP per Capita
Focusing on increasing employment and reducing poverty– From welfare to work– Negative income tax– Non-Israeli workers– Enforcement of labor laws
Increasing labor productivity– Focusing on traditional industries
GDP per Worker, Capital per Worker, Total Factor Productivity and R&D Expenditure
(Israel vs. USA, 1995-2002 averages)
Israel to USA ratio (%)
GDP per capita (USA, $ PPP)Y/LTFPK/LR&D
Mining and digging, wood and its products, non-metal minerals
60,892853223096
Food, beverages, tobacco87,851497214038
Textile, clothing, leather products, paper goods, publishing and printing
62,99952448024
Rubber products and plastic62,317792615144
Basic metal and products71,05457427658
Total traditional and semi traditional industries
71,63656449741
Chemicals and oil refining177,457548010094
Machines, equipment and transport84,05063967150
Traditional industry and mid-tec 94,23153528943
Electric and optical equipment88,3198966102113
Total industry93,47263599498
Thank you!