The differences in speed of recovery between the emerging world and the advanced world, and the likely persistent differences in growth trajectories into the future, will increase the pressure on exchange rate arrangements in the region. The second challenge is the increasing focus on sovereign creditworthiness.
This scenario was highly typical of Israel of the early 1980s, until it was put to an end in 1985 when as part of the Economic Stabilization Program, a law known as the “No Printing Law” was enacted, which prohibited the Bank of Israel from granting loans to the government.