Abstract. This paper examines the impact of dollarization on the performance of the Zimbabwean economy from to using an interrupted time-series. The study investigated the effects of dollarisation on economic growth in Zimbabwe from Q to Q The variables included are gross. Despite this Zimbabwe is viewed as a dollarised economy given that have occurred and the effect that would have had on the Government.

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The speech noted that the increasing access to foreign currency required for dollarisation would mean exporting more than the country was importing. The constant complaint was that the prices of the inputs and capital dollarsiation increased daily and that the clients of the industries delayed the payment or let cancel their debts.

Corrections All material on this site has been provided by the respective publishers and authors. Those practices had an unhappy ending with dollarization.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. Zimbabwe is essentially operating a multiple currency system and does not have an official agreement with the United States Federal Reserve to dollarisaton its currency. This has, in turn, stabilized the overall economy, sustained the buying power of the Zimbabwean people, and allowed the nation as a whole to experience significant economic growth.

Gradually businesses had lost lines of credit to recapitalise, and there was also limited access to foreign currency to procure required resources.

Unsurprisingly Zimbabwe entered into a period of hyperinflation which began to increase exponentially to a point where, in Junethe Central Statistics Offices announced that it would no longer be releasing inflation figures. This paper examines the impact of dollarization on the performance of the Zimbabwean economy from to using an interrupted time-series analysis. The results do not say that we are headed that way.

You can help correct errors and omissions. To facilitate this, the Reserve Bank will be issuing instruments against amounts owed to banks as statutory reserves. This was against a backdrop of ever-dwindling revenue, inflation increasing at alarming levels year on year, and savings which could have been used for recovery being wiped away.

Investigating the Impact of Dollarisation on Economic Growth – A Case of Zimbabwe

It was the time in which it was difficult to plan. We could not continue ignoring washing away inefficiency. An immediate and zinbabwe effect of dollarisation was price stability and reduced inflation.


Businesses were better able to plan because there was more predictability of key indicators. This is partly due o the fact that local businesses have struggled to obtain funding for recapitalisation and have to operate using old machinery which at times cannot be adequately serviced or replaced. What Do we Really Know?

Cash shortages ensued as a result of the inability to keep up fffects the inflation rate and lack of money to continue printing more bearer cheques. The retailers and companies of Zim went ahead with dollarization.

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Investigating the Impact of Dollarisation on Economic Growth – A Case of Zimbabwe

There is, however, a sign of hope in that interest rates have fallen lending to businesses having increased stability since the revised Budget of In October about 10, Zimbabwean troops were deployed to the Congo by the Government. Solutions and the timeline. Dr Ngwenya, on the other hand, maintains that the presence of wealth from exports in the economy is generated by high prices of petroleum and the remittances of emigrants. It will probably take many years before the effects of dollarization in Zimbabwe can be dolllarisation catalogued and understood, but so far the results have been clearly mixed.


The industries and the businesses also adopted this measurement as protection. Definitively, it was a time of instability for the productive sector. Free Registration Now Advertise Now. Despite this Zimbabwe is viewed as a dollarised economy given that the Government conducts all its business using the United States US dollar and it is the currency that has become predominant among the other currencies used in the country.

Zimbabwe experienced a very difficult economic phase characterised by hyperinflation, negative economic growth, unavailability of basic commodities and negative economic growth rates during the period The violent dollarsiation of the removals of the doklarisation white farmers meant that tourist numbers reduced dramatically which served to fuel the increasing shortage of foreign currency as tourism was also a big foreign currency earner for the country.

At the moment, we continue with structural problems: Statistical analysis shows that increased dollarization had positively affected reversed the spiralling effects of hyperinflation that were prevalent prior toalthough inflationary pressures still continued, albeit at a slower pace.

Dollarization has been, then, an economic phenomenon that has had enormous political meaning. A hands-off approach to currency management has served Zimbabwe well sincebut a number of risks are beginning to emerge as the economy has slowly regenerated itself and the need for large capital injections has increased. Dollarisation is not the dollarisatiin for Zimbabwe, but rather a starting point that has brought about a certain level of stability which is needed to support the other changes that need to occur.


Risk Governance and Control: The dollar has been a stability factor. The government continues to heavily rely on borrowing to finance its expenditures. By scrapping its own currency, the Zim government can no longer make its own monetary decisions which Dr.

In the country adopted a multi-currency system whereby the Zimbabwean dollar was in circulation alongside various other currencies, with the United States Dollar and the South African Rand being the dominant ones. Importantly though, for this to work property rights would have had to be restored and the Zimbanwe be seen to be committed to this to allow much needed foreign investors to participate in the recovery.

The January 31, unemployment was 90 dolarisation of the economically active population PEA. The culmination of these events was that the local currency was no longer acceptable to anyone as a store of value, medium of exchange and zjmbabwe of account, and upon receipt of the local currency the first thing to do would be to change it to a more acceptable currency which would provide the security.

But the predicaments are not only for entrepreneurs.

On the other hand, there is also a downside to dollarization. In his first budget as Finance Minister inTendai Biti noted that the Zimbabwean dollar had become a currency that was no longer accepted by the public due zimbzbwe the loss of the main functions of money through loss of confidence. The strength of the dollar, however, proved to be a negative factor because it reduced competitiveness of local products in the international market.

It remains to be seen how much longer the economy will remain dollarised, but it is zimmbabwe to say that for the foreseeable future this will remain the status quo. Dollarization corrected problems with electricity, petroleum, telecommunications and interest rates. You might also like More from author.

The manager said that before dollarization he did not know with certainty how much he gained. Change Sort Order Publication date latest first Publication date earliest first Headline alphabetical Author alphabetical. To dollarisatkon email subscriptions creamermedia.

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