The paper analyses the relative importance of shocks to labor supply, aggregate supply, aggregate demand, monetary policy and immigration in explaining the course of the Israeli economy in 1989-2002. We use structural VAR with short-run and long-run restrictions in order to identify the structural shocks. We learn that variations in output were due mostly to shocks to productivity. (Unexpected) changes in the intensity of immigration play a significant role in explaining the variation of labor supply and contribute to the explanation of the shocks to aggregate supply. Temporary shocks to monetary policy play a relatively minor part in explaining deviations in labor and output supply, as was found in other studies for Israel and elsewhere. Our findings concerning the factors that affected actual growth during the period studied here are consistent with the actual decline in measured labor productivity during those years.

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