more resilient to shocks, release resources for other important needs, and enable the government to operate a counter - cyclical policy when necessary. • the monetary strategy should be continued, acting to ensure price stability, as an intrinsic part of economic and financial stability and as a firm base for sustained growth. • economic reforms should continue. the structural reforms in the areas of privatization, education, competition and the infrastructure should be completed ; this would help increase productivity and growth. moreover, further development of the financial infrastructure and greater competition in the capital market, particularly between the institutions that operate vis - a - vis households, is the right path to follow, and would contribute to growth. i would now like to address three specific issues : 1 ) monetary policy ; 2 ) the economic situation in light of the political situation ; and 3 ) israel's membership of the oecd. 1 ) monetary policy we are currently at a stage where the economy is growing quickly, and inflation is very low, even lower than the target, and this is expressed among other things in price rises in the financial markets. in operating monetary policy we keep our eye on our primary target – the inflation target – and also on the secondary targets, i. e., to contribute to economic activity and financial stability. as every change in the interest rate also affects, to some extent, the rate of growth and the prices of financial assets, in making our interest rate decisions we have to take into consideration the trade - off between these three factors – inflation, growth and financial stability. this is an essential consideration in the whole issue of monetary policy, and it will feature in our future decisions too, as it has till now. 2 ) the economic situation in light of the political situation whenever i speak to investors or analysts from abroad, they always ask the same question, " how can israel's economic situation be so good despite all the political problems facing the country? " i answer : ( a ) the global economy is growing at an impressive rate ; ( b ) the government has maintained fiscal discipline, one of the points on which there is a consensus in israel ; ( c ) in the last fifteen years we have erected a far stronger and more robust economic framework in israel than existed previously, especially in the areas of the foreign currency market and the financial markets in general ; and ( d ) the business sector, during the war last summer, showed its ability to carry on functioning well and more or less meet its delivery dates for

stanley fischer : challenges facing the israeli economy in the globalisation era address by professor stanley fischer, governor of the bank of israel, at the 2008 herzliya conference, herzliya, 21 january 2008. * * * the topic of this session relates to the challenges that our economy faces in the globalization era. indeed, since the early 1990s the israeli economy has undergone a successful process of integrating into the global economy, and today we are already a part – albeit a small part – of it. as part of this integration, the bank of israel headed a campaign of liberalization of capital flows and disinflation until price stability was obtained. the various governments adopted, and have been practicing to this day, an approach of budget discipline and pushed through a series of structural reforms. israel ’ s successful integration into the global economy is manifested, among other things, in rapid growth ; in exports, which reached about 45 percent of gdp ; foreign investment ; a flow of foreign investments into israel ; a high credit rating ; favorable evaluations by international financial institutions ; and an invitation from the oecd to begin the process of joining. these important achievements are contributing to the strong growth and stability of our economy. in one important field in the process of globalizing our economy, however, little has been done thus far : passing a new and modern bank of israel law. the law in effect today was passed in 1954 ; it is antiquated and does not meet the accepted norms in the advanced economies. various governments in israel and the bank of israel have done a great deal of work on the new bank of israel law. in this context, two important milestones are noteworthy : 1. in late 1998, a committee under the late justice dov levin presented the government with recommendations for a new bank of israel law. this was the aftermath of professional work based on other countries ’ efforts in this field, among other things. the members of the commission included prof. haim ben - shahar and prof. alex cukierman, and several noteworthy personalities appeared before it, including the former president of the bundesbank, hans tietmeyer ; the deputy governor of the bank of england, mervyn king ( today the governor ) ; and even myself. 2. on october 2, 2005, shortly after i took up office as governor, the government resolved to adopt the principles of the new bank of israel law in the spirit of the levin committee ’ s recommendations and developments in this field