Goldman Sachs researchers have been hitting the history books again, trying to divine what happens to currencies when economies stagnate. Answer: Not as much as you might think
Looking at exchange rates for years before and during “stagnation”, Goldman found that year-to-year FX volatility in such periods is lower than in normal periods. But a lot of it depends on the type of stagnation.
It is beginning to look like financial markets cannot handle more than three risks. First we have, as MacroScope reported earlier, Barclays Wealth worrying about U.S. consumers, euro zone debt and Asian overheating.
Now comes Jim O’Neill and his economic team at Goldman Sachs, with three slightly different notions about risks in the second half, this time in the form of questions. To whit: