The rate of exchange of the shekel is now, after removal of all
foreign currency restrictions, determined by the international
money market. This was not always the case. As in all post-WWII
economies, Israel's currency exchange rate was a fixed one,
changed (devalued) by government decision from time to time. In
1948 the Israeli lira was equal to one pound sterling (then $4
US); it was devalued to $2.80 in 1949 together with the pound.
Since then Israel's currency has been devalued many times (e.g.,
to 1.80 lira per dollar in 1954, IL3 per dollar in 1962, IL4.20
in 1971 and IL6 in 1974). This, in accordance with the economic
policy, aimed at narrowing the gap between the smaller exports
and imports, and actually compensating foreign trade for the
accumulated local inflation rate since the previous devaluation.
In 1975 Israel followed the change of trend in the OECD and
embarked on a "creeping devaluation" (allowing up to 2%
devaluation per month). This system lasted two years, until the
first step of liberal