Date of Submission

Spring 2016

Academic Programs and Concentrations

Economics; Economics and Finance; Political Studies

Project Advisor 1

Pavlina Tcherneva

Abstract/Artist's Statement

There is extensive literature on the Israeli-Palestinian conflict that studies the historic, political, and social aspects. However, few scholars have examined the economic model that was born out of the conflict and the various implications behind it. According to Charles Goodhart: “A Central Bank has two main functions. Its first (macro-economic) function is the operation of discretionary monetary policy” and a “second (micro-economic) function, of providing support (e.g., via Lender of Last Resort assistance), and regulatory and supervisory services to maintain the health of the banking system”[1]. However, with the Israeli Occupation’s imposed restrictions on the PMA, the latter falls short in carrying out either. Palestine’s regulatory body does not have the monetary tools to tackle macroeconomic targets such as price stability, or achieve microeconomic objectives such as serving commercial banks. Thus, Palestine, does not have institutional and policy support to weather times of crisis and growth. This paper will examine two related monetary issues: First is the role central banks and sovereign currencies have in regulating and stimulating their respective economies. The second is the relationship between monetary sovereignty and state independence. The relationship between the two, including that between their monetary and fiscal authorities, will be illustrated throughout this project.

[1] Charles Goodhart. Money, Information and Uncertainty. (Massachusetts: MIT Press, 1989), 176

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