The Israeli economy has developed immunity to political and security-related crises, a Bank of Israel study concludes based on a "fear" index it created.

The central bank's new index is rather akin to the Chicago Board Options Exchange's VIX volatility index, better known as the "fear index" – it tracks the state of trepidation in the marketplace.

It developed the index to track the state of Israel's financial markets – specifically the bond, stock, and currency markets – on a daily basis. Not that you can see it: the Bank of Israel won't be making its index public for now. It's a tool to help set monetary policy, the central bank explained.

The index, the outcome of research by Bank of Israel spokesman Dr. Yossi Saadon and Meital Graham of its research department, is based on values between "0" and "1". A value approaching "0" reflects calm while values close to "1" indicate a state of crisis.

Like the VIX, the central bank's index allows analysis of untoward events.

It is based on methodology like that used by the U.S. Federal Reserve, says the BoI, adding: "A uniform and objective interpretation of the impact of various events on the financial markets can make the process of determining policy simpler."

Since the crisis brought on by the collapse of the gargantuan U.S.-based hedge fund LTCM in 1998, there have been four events that intensely shook Israel's financial markets, the study shows: the 2002 crisis, the outbreak of the sub-prime crisis in 2007, the collapse of Lehman Brothers in 2008, and warnings over an impending downgrade of U.S. debt – which actually came to pass in 2011 – along with the spread of Europe's debt crisis.

Of the four, only the 2002 crisis directly impacted Israel, yet all these events shook investors badly.

That said, the study indicated that over the years, Israel's economy developed resistance to political and security-related events. This immunity to jolts was expressed by increasingly flat reactions by financial assets to the unhappy events as they took place.

Knowing the economy had successfully weathered such events in the past seems to reduce uncertainty when new crisis arises, the study's authors say. This in and of itself is reason why the Israeli markets react less over time.

The central bank study also examined the reaction of the index to political events. For instance, Benjamin Netanyahu's resignation as finance minister – a position in which he had garnered esteem - on August 8, 2005 caused the index to jump to 0.3. Yet an event with potential to significantly shake up the government, the stroke suffered by then-Prime Minister Ariel Sharon on January 5, 2006, raised the index by much less – just 0.1.

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