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Unbundling Zimbabwe’s journey to hyperinflation and official dollarization


  • Terrence Kairiza

    () (National Graduate Institute for Policy Studies)


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

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    References listed on IDEAS

    1. Albert Makochekanwa, 2007. "Zimbabwe’s Hyperinflation Money Demand Model," Working Papers 200712, University of Pretoria, Department of Economics.
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    More about this item


    Africa; Zimbabwe; Hyperinflation; Currency problems;

    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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