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Zimbabwe’s Unorthodox Dollarization

Author

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  • Bostrom, Erik

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

Abstract

From 2007-2009 Zimbabwe underwent a hyperinflation that culminated in an annual inflation rate of 89.7 sextillion (10^21) percent. Consequently, the government abandoned the local Zimbabwean dollar and adopted a multi-currency system in which several foreign currencies were accepted as legal tender. The most prevalent currency in that system is the U.S. dollar. Without official recognition of dollarization, however, the government enacted laws allowing Zimbabwe to evade the budgetary discipline required from dollarized economy, exposing itself to more potential monetary crises. This paper highlights important Zimbabwean government actions post-April 2009 and analyzes their effects on the Zimbabwean economy. It also explains Zimbabwe’s general financial situation and the major reforms needed to avoid another crisis.

Suggested Citation

  • Bostrom, Erik, 2017. "Zimbabwe’s Unorthodox Dollarization," Studies in Applied Economics 85, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    • Handle: RePEc:ris:jhisae:0085
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    More about this item

    Keywords

    Zimbabwe; hyperinflation; dollarization; government finance;
    All these keywords.

    JEL classification:

    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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