Zimbabwe’s Currency Crisis: Which Currency To Adopt In The Aftermath Of The Multi-Currency Regime?

The study presented main features of possible currency options which can be potentially adopted by Zimbabwe in the aftermath of multi-currency regime. The currency options analyzed are dollarization, joining the CMA and re-introduction of the Zimbabwe dollar (Z$). The proposed management systems to underpin the reintroduction of the Zimbabwean dollar are currency board, free banking and Reserve Bank of Zimbabwe (RBZ). For each of the options analyzed, the practicality of Zimbabwe in adopting and/or implementing such currency was also explained. Although any of the three options could be adopted and implemented, the study considered the options in the following descending order of priority: (i) dollarization, (ii) retaining the Z$ but under the management system of a currency board, (iii) Joining the CMA, (iv) retaining the Z$ under the management of RBZ, with the institution having new management, and lastly (v) free banking.Multi-currency; hyperinflation; dollarization; currency board; free banking

A Dynamic Enquiry into the Causes of Hyperinflation in Zimbabwe

The purpose of this study is to determine the causes of hyperinflation in Zimbabwe for the period February 1999 to December 2006 using appropriate econometric techniques. Results from long run and shot run econometric models shows money supply, black market for foreign exchange (US$) and lagged values of hyperinflation to be positively correlated with the country’s hyperinflation trend. This result accords well with the various theories of hyperinflation. Surprisingly, political rights index as a determinant is negatively associated with hyperinflation, suggesting that an increase in this variable reduces hyperinflation. This is against economic theory, which expects a positive sign for this, variable. Granger causality test is also conducted between money supply and hyperinflation to empirically test the direction of causality, while sensitivity tests are done to infer the effect of money supply shock on hyperinflation trend.

An Empirical Investigation of Capital Flight from Zimbabwe

This paper investigates the causes of capital flight from Zimbabwe for the period 1980 to 2005. The results show external debt, foreign direct investment inflows, and foreign reserves to be the major causers of capital flight. Economic growth is negatively correlated with capital flight. The calculations estimate Zimbabwean capital flight at US $10.1 billion over the 1980 to 2005 period, with capital flight-to-GDP ratio roughly 5.4 per cent. In other words, for every US dollar of GDP accumulated by Zimbabwe annual from 1980 to 2005, private Zimbabwean residents accumulated (US) 5.4 cents of external assets annually during the same period.Capital flight, external debt, foreign direct investment inflows, macroeconomic instability

Zimbabwe’s Hyperinflation Money Demand Model

The research attempts to empirically study the demand for money, especially the magnitudes of the price expectation and real cash balance adjustment for Zimbabwe. Price expectation and real cash balance adjustment models are estimated. The results show that both the interest rate and the rate of change in prices are relevant variables for explaining the variations in the demand for real cash balances in Zimbabwe. Overall, the findings suggest that the Zimbabwean hyperinflation does not appear to have been a self- generating process independent of money supply.Hyperinflation, Real Cash Balances, Price Expectation, Equilibrium, Error Correction Model

Botswana’s revealed comparative advantage

Analysis of Botswana’s competitiveness in world trade has been presented based on indices of revealed comparative advantage (RCA) calculated for the period 1999 and 2004. Results show that Botswana has RCA in diamonds, copper matte, and meat of bovine animals, among other products. Changes in values of RCA over time reinforce the dynamic nature of comparative advantage. The study established that the country gained comparative specialization in the following products: sugar products; copper ores and concentrates, in which it previously had comparative disadvantage. On the downward side, the country lost specialization in products such as coal gas and water gas.Africa, Botswana, exports, revealed comparative advantage, revealed comparative disadvantage

Clothed in rags by hyperinflation: the case of Zimbabwe

After employing a number of qualitative methodologies in investigating and analyzing the devastating hardships and sufferings inflicted on ordinary Zimbabweans by the hyperinflationary environment bedeviling the country, the study found some interesting things. Some of the hardships and sufferings currently common and being experienced by most Zimbabweans on daily basis include non affordability of essential products and services, non availability of local currency in banks, not allowed to withdraw enough cash from banks, endurance of long and winding bank queues, the inability to make any projected financial planning, inability to make credit purchases and stressful life. The research also found that most people ended up engaging themselves in barter trading, dollarization, buying and selling, foreign currency dealing and money ‘burning’ as strategies to survive in this hyperinflationary environment. Lastly, increased criminal activities, erosion of generally held good morals as well as disappearance of good business ethics have been found to be some of the consequences of hyperinflation on the human behaviour of most Zimbabweans.Hyperinflation, hardships, sufferings, survival, strategies

Chiadzwa Diamonds: Zimbabwe’s potential economic recovery option

The research was motivated by the need for Zimbabwe’s financial assistance to kick-start the recovery of its economy from the meltdown it has been for more than a decade. Since the formation of the government of national unity (GNU) on February 13, 2009, government of Zimbabwe’s (GoZ) begging bowl for US$8.3 billion financial assistance has been extensively preached to both southern African countries and the world over. This study presents a totally different financial avenue, Chiadzwa diamond. Using the two estimated monthly revenue sales of US$1 billion and US$1.2 billion from Chiadzwa diamond, the study argues that the country’s immediate financial requirements of at least US$8.3 billion can be wholly met with proceeds from this mine field only if the new unity government has a political will. Partial projections presented in this paper shows that, once diamond revenue sales are harnessed by the government for the benefit of the whole economy as opposed to the current situation where the few revenues are only benefiting few politicians and their relatives, the country’s GDP can jump from the 2008 level of US$3.2 billion to at least US$16.7 billion starting 2009. The paper also suggested management frameworks that the GoZ can consider implementing in the management of Chiadzwa diamond.Chiadzwa diamonds, economic recovery, US$8.3 billion

Zimbabwe’s Black Market for Foreign Exchange

This paper looks into the changes of the black market premium for foreign exchange in Zimbabwe. Generally, the black market for foreign exchange arises as a direct consequence of the adoption of exchange rate controls in many developing economies facing substantial macroeconomic imbalances. Despite its negative impact on Zimbabwe’s economy, this market has not, so far, attracted the attention of researchers. The research attempts to describe the functioning of the black market and find out the determinants of the parallel premium based on a stock-flow model as well as to investigate whether inflation Granger causes the parallel exchange rate. Estimated results reveal that the determinants of the black market premium are international foreign reserves, real exchange rate, lagged values of the black market premium, expected rate of devaluation, money supply and inflation. On the other hand, inflation and black market are found to Granger-cause each other during the period under consideration.Black Market Exchange Rate, Black Market Premium, Foreign Exchange Controls, Cointegration, Granger Causality

The impact of a budget deficit on inflation in Zimbabwe

The Zimbabwean economy is one of the many numbers of countries that has experienced a relatively high fiscal deficit for a prolonged period with the result of a high inflationary environment. This paper examines the deficit-inflation nexus in the Zimbabwean economy and establishes the causal link that runs from the budget deficit to the inflation rate using Johansen (1991, 1995) cointegration technique over the period 1980 – 2005. Due to massive monetization of the budget deficit, significant inflationary effects are found for increases in the budget deficit.Budget deficit; inflation; contegration

Dwindling access to basic services in Zimbabwe

The study narrates the decline in access to three basic publicly provided services, namely, health, education, and water and sanitation for Zimbabwe for the period covering 2000 to May 2009. Special emphasis is placed on the impact of fiscal fragility on the ability of the government to provide these services. Through interviews and newspaper articles, the research found that, for the period under study, very few Zimbabweans residing in the country were able to access these basic services because they were not supplied in sufficient amounts, were not supplied at all, or were exorbitantly priced.fiscal fragility; health; education; water and sanitation