##anke, b. s. ( 2007 ) “ housing finance and monetary policy ”, speech at the federal reserve bank of kansas economic symposium, jackson hole, wyoming : 31 august. imf ( 2008 ) global financial stability report, washington d. c. 4. some considerations regarding policy my discussion of policy will be brief for two reasons. first, because the bulk of the effort of this conference will be devoted to this matter : and second, because the subtitle of the conference is : “ business unusual ”. according to president thabo mbeki, to whom authorship of this phrase is ascribed, “ business unusual ” does not refer “ … to any changes in our established policies … ” ; rather it refers to “ … the speedy, efficient and effective implementation of these policies and programmes, so that the lives of our people should change for the better, sooner rather than later. ” so, to use the idiom of the contemporary policy analyst, we can assume that the policy thing has been parameterised : in the form of the rdp ( 1994 ) ; gear ( 1996 ) ; the growth and development summit ( 2003 ) and the asgisa ( 2005 ). my only caution is that in proceeding, sight should not be lost of the fine balance that needs to be maintained between the state and the market as the primary allocator of resources. for, as schumpeter observed 5, when the state is pre - eminent and its shortcomings are highly visible, economists and others seem to swoon over the charm of the market. but when the market is in the ascendancy and its drawbacks are evident, then the state may be idealised. both extremes should be resisted. 5. conclusion let me conclude by making the following observations. first, fairy tales have a useful function to perform in entertaining children – but are of dubious value in enhancing discussions of economics. goldilocks and her kindred spirits should, please, be allowed to go away from the pages of economic analysis. second, any notion that the south african economy is soon to enter a recession 6 must be rejected, firmly. the current growth rate of the economy may be somewhat lower than had come to be expected but is still strongly positive and will remain so. the so - called “ tsunami ” of adverse economic outcomes in the period subsequent to march 2007 will lose momentum as inflation abates, the balance between aggregate saving and investment improves, the process of financial deepening intensifies and

which support investment, but a strong rise in household debt seems like an unsustainable growth model. third, we need to keep an eye on international competitiveness. a depreciated rand makes our goods and services relatively attractive, but inflation counteracts this – naturally, the more we raise prices, the more expensive we get. south african inflation tends to be higher than that of our trading partners, so as the exchange rate recovers, our real, inflation - adjusted exchange rate appreciates quite rapidly. unfortunately, the line between cheap and expensive is not always that clear. the real effective exchange rate still looks highly depreciated, relative to its historical average, and on a purchasing power parity basis. however, more sophisticated exchange rate models, such as those which incorporate variables such as productivity differences and current account balances, put the fair value of the rand much closer to current levels. these latter estimates tell us something about one of the puzzles of the post - crisis period, which is that rand depreciation has not brought about all the trade benefits we would normally expect. in 2010, with the rand close to seven to the dollar, we were repeatedly urged to intervene with the message that a rand closer to nine or ten to the dollar would do wonderful things for exports. yet as the rand passed ten, then twelve, then fourteen, then sixteen, net exports stayed weak. in part, this reflects global factors. for instance, falling commodity prices lower export values. with the spread of global value chains, moreover, national exchange rate movements have smaller effects on trade : higher import prices offset lower selling prices. in addition, domestic factors may have played important roles. new research demonstrates convincingly that constraints such as electricity shortages, as well as product and labour market rigidities, have reduced the stimulatory effect of a cheap exchange rate. there is also compelling evidence that policy uncertainty has further weakened net exports. anand, rahul, roberto perrelli, and boyang zhang ( 2016 ), “ south africa ’ s exports performance : any role for structural factors? ” imf working paper wp / 16 / 24. hlatshwayo, sandile and magnus saxegaard ( 2016 ), “ the consequence of policy uncertainty : disconnects and dilutions in the south african real effective exchange rate - export relationship ”, imf working paper wp / 16 / 113. this lack of a trade response to rand depreciation is one of