Moreover, as theory suggested would be the case, once wage- and price-setting behaviour adjusted to the new, low, level of inflation, employment and output both recovered quite quickly, with unemployment declining from almost 11 per cent in 1991 to 6 per cent in 1996.
That the interest rate channel is working in the dinar segment of the market is confirmed by the concurrent decline in interest rates on dinar loans to households and corporates by almost 10 pp to the lowest levels on record. Interest rates on government dinar securities also declined.