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Unbundling Zimbabwe’s journey to hyperinflation and official dollarization

Author

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  • Terrence Kairiza

    (National Graduate Institute for Policy Studies)

Abstract

The first impetus to Zimbabwe’s drive to hyperinflation and official dollarization predates the disruption in production caused by the fast-track land reform programme. The initial push came from the departure from relatively disciplined fiscal policies to a string of measures aimed at pacifying restive groups threatening political power through the transfer of economic and financial resources to those groups to the detriment of the fiscus. This stance caused investors to run away from the Zimbabwean currency thus causing currency depreciation hence inducing cost-push inflation which was worsened by the decline in production that accompanied the land reform programme and the associated disturbances to production in all sectors of the economy. The liquidity expansion by the central bank to prop the ruling party embodied in the quasi-fiscal activities veiled as expansionary Keynesian economics played a major role in firmly setting the stage for hyperinflation in the latter stages of the saga. In the backdrop of hyperinflation, the institution of official dollarization was merely de jure recognition of the unofficial dollarization that had set in. On the basis of Zimbabwe’s idiosyncrasies, the article contends that any attempt to dedollarize should be an endogenous outcome of a policy of macroeconomic stabilization.

Suggested Citation

  • Terrence Kairiza, 2009. "Unbundling Zimbabwe’s journey to hyperinflation and official dollarization," GRIPS Discussion Papers 09-12, National Graduate Institute for Policy Studies.
  • Handle: RePEc:ngi:dpaper:09-12
    as

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    References listed on IDEAS

    as
    1. Jeta Menkulasi & Lodewyk Erasmus & Jules Leichter, 2009. "Dedollarization in Liberia-Lessons From Cross-Country Experience," IMF Working Papers 2009/037, International Monetary Fund.
    2. Albert Makochekanwa, 2007. "Zimbabwe’s Hyperinflation Money Demand Model," Working Papers 200712, University of Pretoria, Department of Economics.
    3. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 28241.
    4. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 11855.
    5. World Bank, 2009. "World Development Indicators 2009," World Bank Publications - Books, The World Bank Group, number 4367.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Saungweme Talknice & Odhiambo Nicholas M., 2021. "Public debt and inflation dynamics: Empirical evidence from Zimbabwe," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 7(2), pages 14-30, December.
    2. Rustam Jamilov & Tobias König & Karsten Müller & Farzad Saidi, 2024. "Two Centuries of Systemic Bank Runs," CRC TR 224 Discussion Paper Series crctr224_2024_589, University of Bonn and University of Mannheim, Germany.
    3. Saungweme Talknice & Odhiambo Nicholas M., 2021. "Public debt and inflation dynamics: Empirical evidence from Zimbabwe," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 7(2), pages 14-30, December.
    4. Farai Maunganidze & Debby Bonnin & Shaun Ruggunan, 2021. "Economic Crisis and Professions: Chartered Accountants in Zimbabwe," SAGE Open, , vol. 11(1), pages 21582440219, February.
    5. Banele Dlamini & Leonard Mbira, 2017. "The Current Zimbabwean Liquidity Crisis: A Review of its Precipitates," Journal of Economics and Behavioral Studies, AMH International, vol. 9(3), pages 212-219.
    6. Miller, Stephen Matteo & Ndhlela, Thandinkosi, 2020. "Money demand and seignorage maximization before the end of the Zimbabwean dollar," Journal of Macroeconomics, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Africa; Zimbabwe; Hyperinflation; Currency problems;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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