The study looked at how changes in monetary and exchange rate policies in Israel from 1989 to 2002 affected the economy. They found that the Bank of Israel adjusted interest rates in response to inflation, leading to fluctuations in output. After 1997, the Bank became more focused on controlling inflation, which increased interest rate volatility. Despite this, inflation volatility also rose due to changes in the exchange rate and its impact on prices. In the long run, inflation volatility decreased as the Bank reacted more aggressively to inflation. Changes in policy in 1997 also led to higher output volatility in response to economic shocks.