Entries by Joe Spearing

Terminating NAFTA: What would the impact on Canada be?

• As NAFTA negotiations become increasingly fraught, the risk of a complete termination by US President Donald Trump is increasing
• The long-run impact of such a termination is likely to be limited, based on the MFN tariffs the US could apply
• The most likely impact would be in terms of the real economy, as the shock generated would hit consumption, spook investment and delay the Bank of Canada’s hiking cycle.
• To investigate the magnitude of this effect, we model the impact on real economic variables and interpret the impact on the Canadian dollar. Our results suggest that a 6% depreciation of the Canadian dollar against the US dollar could be justified.

The dilemmas of Pravin Gordhan

• On 22nd February, Finance minister Gordhan presented his annual budget to the national assembly.
• Gordhan faced a painful trade-off between managing South Africa’s eye-watering debt situation, supporting stagnant private consumption and political sustainability in the most unequal country in the world
• We simulate South Africa’s debt/GDP path under different assumptions, and argue that the economy still has a long way to go to achieve fiscal sustainability

Brexit: how bad could it get?

In April we noted the uncertainty that a Brexit vote would bring to the British economy.
In this post, we examine how the economic risk the UK now faces may be manifested in a post-Brexit UK. In particular, we look at a “worst case scenario”, and what this might mean for the economy, and the currency.