A Dynamic Enquiry into the Causes of Hyperinflation in Zimbabwe
AbstractThe purpose of this study is to determine the causes of hyperinflation in Zimbabwe for the period February 1999 to December 2006 using appropriate econometric techniques. Results from long run and shot run econometric models shows money supply, black market for foreign exchange (US$) and lagged values of hyperinflation to be positively correlated with the country’s hyperinflation trend. This result accords well with the various theories of hyperinflation. Surprisingly, political rights index as a determinant is negatively associated with hyperinflation, suggesting that an increase in this variable reduces hyperinflation. This is against economic theory, which expects a positive sign for this, variable. Granger causality test is also conducted between money supply and hyperinflation to empirically test the direction of causality, while sensitivity tests are done to infer the effect of money supply shock on hyperinflation trend.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200710.
Length: 30 pages
Date of creation: Jul 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-AFR-2007-11-17 (Africa)
- NEP-ALL-2007-11-17 (All new papers)
- NEP-MAC-2007-11-17 (Macroeconomics)
- NEP-MON-2007-11-17 (Monetary Economics)
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