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Evolution of Zimbabwe’s economic tragedy: a chronological review of macroeconomic policies and transition to the economic crisis

  • Ndlela, Thandinkosi
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    This paper chronicles Zimbabwe’s macroeconomic policies and economic development trends from the post independence period up to end of 2006. By focussing on monetary and exchange rate policies and their influence on economic developments before and after the reform programme in 1991, the paper attempts to reveal the critical macroeconomic policy underpinnings of Zimbabwe’s post-2000 economic tragedy. A key insight from the review is that despite what seemed to be concerted economic management efforts, the authorities actually never succeeded in attaining sustainable economic stabilization goals from the very start of the post-independence era. The constraints imposed by the inward looking policies of the 1980s and the eventual failure of ‘free market’ exchange rate policies of the early 1990s resulted in chronic real exchange rate overvaluation and depletion of foreign exchange reserves. This eventually culminated in the so-called “Black Friday” currency crash, and a severe foreign exchange crisis that has since been viewed as one of the most important factors that led to the economic tragedy. Hence in retrospect, the review concludes that the post-independence government in Zimbabwe never succeeded in bringing the economy into long term structural equilibrium and, thus failed to create an enabling environment for medium to long term macroeconomic policy sustainability.

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    File URL: http://mpra.ub.uni-muenchen.de/32703/1/MPRA_paper_32703.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32703.

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    Date of creation: 08 Aug 2011
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    Handle: RePEc:pra:mprapa:32703
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    1. Huizinga, H., 1994. "Real Exchange Rate Misalignment and Redistribution," Papers 9490, Tilburg - Center for Economic Research.
    2. Sebastian Edwards, 1989. "Tariffs, Capital Controls, and Equilibrium Real Exchange Rates," Canadian Journal of Economics, Canadian Economics Association, vol. 22(1), pages 79-92, February.
    3. Agenor, P.R., 1992. "Parallel Currency Markets in Developing Countries : Theory, Evidence, and Policy Implications," Princeton Studies in International Economics 188, International Economics Section, Departement of Economics Princeton University,.
    4. Sebastian Edwards, 1987. "Exchange Controls, Devaluations and Real Exchange Rates: The Latin American Experience," NBER Working Papers 2348, National Bureau of Economic Research, Inc.
    5. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
    6. Goderis, Benedikt & Ioannidou, Vasso P., 2008. "Do high interest rates defend currencies during speculative attacks New evidence," Journal of International Economics, Elsevier, vol. 74(1), pages 158-169, January.
    7. Backus, David & Driffill, John, 1985. "Rational Expectations and Policy Credibility Following a Change in Regime," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 211-21, April.
    8. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    9. Sebastian Edwards, 1989. "Real Exchange Rates in the Developing Countries: Concepts and Measure- ment," NBER Working Papers 2950, National Bureau of Economic Research, Inc.
    10. Ndlela, Daniel & Robinson, Peter, 2007. "Distortions to Agricultural Incentives in Zimbabwe," Agricultural Distortions Working Paper 48515, World Bank.
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