1. Research Department, Bank of Israel, Jerusalem, Israel; Tel: +972 22 6552 641, Fax: +972 2 671 752 E‐mail:
2. Department of Economics, Wesleyan University, Middletown, CT 06459, USA; Weatherhead Center for International Affairs, Harvard University, Cambridge, MA 02138, USA; Tel: 1 860 685 2356, Fax: 1 860 685 2781 E‐mail: