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

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  • Ndlela, Thandinkosi

Abstract

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.

Suggested Citation

  • Ndlela, Thandinkosi, 2011. "Evolution of Zimbabwe’s economic tragedy: a chronological review of macroeconomic policies and transition to the economic crisis," MPRA Paper 32703, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:32703
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    File URL: https://mpra.ub.uni-muenchen.de/32703/1/MPRA_paper_32703.pdf
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    References listed on IDEAS

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    1. Huizinga, Harry, 1997. "Real exchange rate misalignment and redistribution," European Economic Review, Elsevier, vol. 41(2), pages 259-277, February.
    2. Edwards, Sebastian, 1989. "Exchange Controls, Devaluations, and Real Exchange Rates: The Latin American Experience," Economic Development and Cultural Change, University of Chicago Press, vol. 37(3), pages 457-494, April.
    3. Ndlela, Daniel & Robinson, Peter, 2007. "Distortions to Agricultural Incentives in Zimbabwe," Agricultural Distortions Working Paper 48515, World Bank.
    4. 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.
    5. 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,.
    6. Sebastian Edwards, 1989. "Real Exchange Rates in the Developing Countries: Concepts and Measure- ment," NBER Working Papers 2950, National Bureau of Economic Research, Inc.
    7. 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.
    8. David Backus & John Driffill, 1985. "Rational Expectations and Policy Credibility Following a Change in Regime," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 211-221.
    9. 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.
    10. 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.
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    More about this item

    Keywords

    Zimbabwe; exchange rate misalignment; macroeconomic policy; economic crisis;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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