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Central Bank Quasi-Fiscal Losses and High Inflation in Zimbabwe: A Note

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  • Sònia Muñoz
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    Abstract

    Zimbabwe''s failure to address continuing central bank quasi-fiscal losses has interfered with both monetary management and the independence and credibility of the Reserve Bank of Zimbabwe (RBZ). Realized quasi-fiscal losses are estimated to have amounted to about 75 percent of GDP in 2006. Because they were financed by creating money creation or issuing RBZ securities, they contributed to the four-digit inflation reached in 2006. The remedy for the current situation is clearly to eliminate the causes of losses by implementing measures to improve the cash-flow of the bank and restore its financial position.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/98.

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    Length: 20
    Date of creation: 01 Apr 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/98

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    Keywords: Deficit financing; central bank; inflation; central banks; monetary fund; open market operations; monetary policy; monetary impact; reserve bank; monetary management; government securities; reserve requirements; monetary expansion; monetary growth; monetary base; money supply; domestic currency; monetary policy instruments; aggregate demand; monetary objectives; monetary targets; money demand; demand for money; liquidity management; monetary policy implementation; government deficit; monetary liabilities; external debt; balance of payment; current account; monetary stability;

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    1. Pierre-Richard Agenor & E. Murat Ucer, 1999. "Exchange market reform, inflation, and fiscal deficits," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(1), pages 81-96.
    2. Rudi Dornbusch, 2001. "Fewer Monies, Better Monies," American Economic Review, American Economic Association, vol. 91(2), pages 238-242, May.
    3. Peter Stella, 2005. "Central Bank Financial Strength, Transparency, and Policy Credibility," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 335-365, September.
    4. G. A. Mackenzie & Peter Stella, 1996. "Quasi-Fiscal Operations of Public Financial Institutions," IMF Occasional Papers 142, International Monetary Fund.
    5. Claudia Helene Dziobek & John W. Dalton, 2005. "Central Bank Losses and Experiences in Selected Countries," IMF Working Papers 05/72, International Monetary Fund.
    6. Teijeiro, Mario O., 1989. "Central bank losses : origins, conceptual issues, and measurement problems," Policy Research Working Paper Series 293, The World Bank.
    7. Peter Stella, 1997. "Do Central Banks Need Capital?," IMF Working Papers 97/83, International Monetary Fund.
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    Cited by:
    1. Manoel Bittencourt, 2008. "Macroeconomic Performance and Inequality: Brazil 1983-1994," Working Papers 101, Economic Research Southern Africa.
    2. Osama Sweidan, 2010. "Central bank inability and Taylor rule in developing countries," International Review of Economics, Springer, vol. 57(4), pages 395-409, December.
    3. Jens R. Clausen & Sharmini Coorey & Bakar Ould-Abdallah & Sònia Muñoz & Norbert Funke, 2007. "Lessons From High Inflation Epidsodes for Stabilizing the Economy in Zimbabwe," IMF Working Papers 07/99, International Monetary Fund.

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