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

JPY: Has Japan lost the Currency War?

The currency war “truce” at the G20 meeting in February of this year has effectively placed political pressure on Japan to refrain from further depreciation of the yen. We investigate whether this has frozen USDJPY at its “fair value”. Although a naïve reading of PPP figures suggests that the outcome is reasonable, adjustment for productivity differentials suggests that the yen is now heavily overvalued versus the dollar, with attendant negative consequences for the Japanese economy.

SNB vs CNB : Currency Interventions

•The economic rationale for entering, and ultimately exiting a regime of exchange rate interventions is markedly different for the Czech National Bank relative to the Swiss National Bank.

•The central bank balance sheet, politics and nature of the underlying economy (and currency) are, amongst other things, important factors in helping determine the likelihood of a central bank continuing to intervene in the FX market.