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The Effect of Zimbabwe's Multi-Currency Arrangement on Bilateral Trade: Myth Versus Reality

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  • Steven Buigut

    (School of Business, American University in Dubai, Dubai, UAE)

Abstract

To tame the hyperinflation experienced in the country, Zimbabwe adopted a relatively unique solution by implementing a multi-currency system in January 2009. Five foreign currencies were granted official status. However, this arrangement is viewed as a temporary measure to restore stability and there is no commitment by authorities to maintain it long-term. The present study uses a theoretically consistent gravity model that accounts for endogeneity, to estimate the effect of the multi-currency arrangement implemented in Zimbabwe on bilateral trade. The period covered by the study is from 2004 to 2012 using a total of 50 potential trading partners from Africa, Asia, Western Europe, Eastern Europe, North and South America. The results suggest that the multi-currency arrangement as adopted has depressed Zimbabwe's bilateral trade by nearly 15%.

Suggested Citation

  • Steven Buigut, 2015. "The Effect of Zimbabwe's Multi-Currency Arrangement on Bilateral Trade: Myth Versus Reality," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 690-700.
    • Handle: RePEc:eco:journ1:2015-03-08
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    More about this item

    Keywords

    Multi-Currency Regime; Gravity Model; Trade; Zimbabwe;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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