Reflections on the South African Rand Crisis of 1996 and its Consequences.
After South Africa's democratic elections in 1994, large capital inflows were induced by the cessation of trade and financial sanctions, improved creditworthiness and a liberalised capital account for foreigners. The flows were managed in a classic trade-off between currency stability, and rais...
| Main Authors: | , |
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| Format: | Working paper |
| Language: | English |
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CSAE
1999
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| _version_ | 1826293509576982528 |
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| author | Aron, J Elbadawi, I |
| author_facet | Aron, J Elbadawi, I |
| author_sort | Aron, J |
| collection | OXFORD |
| description | After South Africa's democratic elections in 1994, large capital inflows were induced by the cessation of trade and financial sanctions, improved creditworthiness and a liberalised capital account for foreigners. The flows were managed in a classic trade-off between currency stability, and raised interest rates to counter inflation resulting from a credit boom and partially sterilised intervention. In early 1996, the currency suffered a speculative attack. Using a theoretical model of currency crises, we present some empirical results suggesting the importance of economic fundamentals and policy credibility as determinants of investors' devaluation expectations prior to the crisis. Poor growth associated with subsequent protracted currency volatility and high interest rates argues for a range of complementary policies to manage inflows in South Africa. These include reserve requirements on certain inflows, prudent further liberalisation of domestic exchange controls, improved private and government savings policies, a medium-term public debt framework and closer monitoring of risk management by banking and other financial institutions. |
| first_indexed | 2024-03-07T03:31:13Z |
| format | Working paper |
| id | oxford-uuid:bac6c41b-58a2-417c-970b-86ef1e2805bc |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T03:31:13Z |
| publishDate | 1999 |
| publisher | CSAE |
| record_format | dspace |
| spelling | oxford-uuid:bac6c41b-58a2-417c-970b-86ef1e2805bc2022-03-27T05:12:14ZReflections on the South African Rand Crisis of 1996 and its Consequences.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:bac6c41b-58a2-417c-970b-86ef1e2805bcEnglishDepartment of Economics - ePrintsCSAE1999Aron, JElbadawi, IAfter South Africa's democratic elections in 1994, large capital inflows were induced by the cessation of trade and financial sanctions, improved creditworthiness and a liberalised capital account for foreigners. The flows were managed in a classic trade-off between currency stability, and raised interest rates to counter inflation resulting from a credit boom and partially sterilised intervention. In early 1996, the currency suffered a speculative attack. Using a theoretical model of currency crises, we present some empirical results suggesting the importance of economic fundamentals and policy credibility as determinants of investors' devaluation expectations prior to the crisis. Poor growth associated with subsequent protracted currency volatility and high interest rates argues for a range of complementary policies to manage inflows in South Africa. These include reserve requirements on certain inflows, prudent further liberalisation of domestic exchange controls, improved private and government savings policies, a medium-term public debt framework and closer monitoring of risk management by banking and other financial institutions. |
| spellingShingle | Aron, J Elbadawi, I Reflections on the South African Rand Crisis of 1996 and its Consequences. |
| title | Reflections on the South African Rand Crisis of 1996 and its Consequences. |
| title_full | Reflections on the South African Rand Crisis of 1996 and its Consequences. |
| title_fullStr | Reflections on the South African Rand Crisis of 1996 and its Consequences. |
| title_full_unstemmed | Reflections on the South African Rand Crisis of 1996 and its Consequences. |
| title_short | Reflections on the South African Rand Crisis of 1996 and its Consequences. |
| title_sort | reflections on the south african rand crisis of 1996 and its consequences |
| work_keys_str_mv | AT aronj reflectionsonthesouthafricanrandcrisisof1996anditsconsequences AT elbadawii reflectionsonthesouthafricanrandcrisisof1996anditsconsequences |