Zimbabweans under Humpty Dumpty Economics (original) (raw)
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The first impetus to Zimbabwe’s drive to hyperinflation and official dollarization predates the disruption in production caused by the fast-track land reform programme. The initial push came from the departure from relatively disciplined fiscal policies to a string of measures aimed at pacifying restive groups threatening political power through the transfer of economic and financial resources to those groups to the detriment of the fiscus. This stance caused investors to run away from the Zimbabwean currency thus causing currency depreciation hence inducing cost-push inflation which was worsened by the decline in production that accompanied the land reform programme and the associated disturbances to production in all sectors of the economy. The liquidity expansion by the central bank to prop the ruling party embodied in the quasi-fiscal activities veiled as expansionary Keynesian economics played a major role in firmly setting the stage for hyperinflation in the latter stages of t...
2019
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Hyperinflation in Zimbabwe: Background, Impact, and Policy
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The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
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Zimbabwe experienced the first hyperinflation of the 21st century. 1 The government terminated the reporting of official inflation statistics, however, prior to the final explosive months of Zimbabwe's hyperinflation. We demonstrate that standard economic theory can be applied to overcome this apparent insurmountable data problem. In consequence, we are able to produce the only reliable record of the second highest inflation in world history.
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This paper is a bird s eye view on the pros and cons of dollarisation on the Zimbabwean economy. On January 29, 2009 Zimbabwe fully legalised the use of foreign currency for domestic transactions releasing the economy from the grip of the Reserve Bank which had printed enough money to drive the country into hyperinflation. At the height of hyperinflation in November 2008 prices were doubling every 24.7 hours or an equivalent daily inflation of 98%. Dollarisation which was underlined by political accommodation had the immediate effect of stopping hyperinflation and the country entered deflation leading to the decline of consumer prices. However, a major problem the country is facing despite dollarisation is that of being locked in a liquidity crunch making it difficult to justify the country's economic asset pricing. Moreover, the benefits of dollarisation remain invisible to the majority since 80% of the people are unemployed. Despite these challenges the stabilisation of the po...
Monetary Reforms and Inflation Dynamics in Zimbabwe
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The study examines and assesses the causes of inflation in the post-dollarized Zimbabwe. It employs time series econometric methodology based on monthly data to examine the probable factors influencing inflation in the post-dollarized Zimbabwe. The influence on inflation of factors such imports, consumer expectation about future inflation, exchange rate, interest rates, output growth and money supply, among others is investigated. Although interest rate has been found to be one of the major determinants of inflation in Zimbabwe by studies done during the pre-dollarization period, this study finds statistical evidence of an insignificant relationship between interest rate and inflation in dollarized Zimbabwe. The study however finds evidence that consumer expectations about future inflation, money supply, current exchange rate, and import value are the major factors influencing post-dollarization inflation.