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Factors That Impede Viable Bond Market Development In One Hyperinflationary Economy

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  • Dennis Sibanda
  • Job Dubihlela

Abstract

This study offers an assessment of the viability of the fixed income securities market for one hyperinflationary economy since 1997 when its financial market took a volatile shape. The financial sector (banks) continues to grapple in trying to address inflationary pressures, while long term lending for capital development (bond market) including the secondary market is struggling to take off the ground. The combined effects of short-term interest rate volatility, political instability and hyperinflation in the Zimbabwean economy led to great uncertainty in its securities market and consequently, to unstable bond market. Data were collected through secondary sources and additionally, surveys were carried out; shows that inflation is the main factor contributing to the uncontrollable volatility of short term interest rates. The subsequent effect of inflationary pressures increased uncertainty in pricing of long term securities such as bonds. Empirical findings, expert advice, facts and opinions were used, with recommendations on what needs to be done to salvage the securities market in Zimbabwe, and to create a viable and stable fixed income market (imperative for capital investment and infrastructure development).

Suggested Citation

  • Dennis Sibanda & Job Dubihlela, 2013. "Factors That Impede Viable Bond Market Development In One Hyperinflationary Economy," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 4(1), pages 107-118.
    • Handle: RePEc:ibf:rbfstu:v:4:y:2013:i:1:p:107-118
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    References listed on IDEAS

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    Cited by:

    1. Tazviona Richman Gambe & Hermanus Stephanus Geyer & Anele Horn, 2022. "Economic Resilience of City‐Regions in Southern Africa: An Exploratory Study of Zimbabwe," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(2), pages 438-455, April.
    2. Aitor Erce & Enrico Mallucci & Mattia Picarelli, 2021. "A Journey in the History of Sovereign Defaults on Domestic Law Public Debt, Sovereign Histories," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 2108, Departamento de Economía - Universidad Pública de Navarra.
    3. Saungweme Talknice & Odhiambo Nicholas M., 2018. "A Critical Review of the Dynamics of Government Debt Servicing in Zimbabwe," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 28(3), pages 20-36, September.

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    More about this item

    Keywords

    Rules versus Discretion; Stabilization; Treasury; Bond market; Hyper-inflation; Financial Markets; Market volatility; Interest rates; Zimbabwe;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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