Dollarization helped zimbabwe arrest hyperinflation, among other. Empirical evidence and crosscountry experience 4 whose receipts are in local currency may be unable to service their bank loans which would potentially lead to banking crisis. This saw the zimbabwe stock exchange start to quote prices of shares in the united states dollar usd. The study admin july 27, 2019 july 27, 2019 no comments on effects of dollarisation in zimbabwe pdf. It shows how dollarization has allowed zimbabwe to quash hyperinflation, restore stability, increase budgetary discipline, and reestablish monetary credibil ity. Unbundling zimbabwes journey to hyperinflation and official. Three years after dollarization the zimbabwean economy is on the recovery path. Zimbabwe phases out local currency at 35 quadrillion to us. The research was conducted to assess the possibility of reintroducing the zimbabwean dollar. In addition, dollarization reduces the ability of central banks to raise revenue from money creation.
The first impetus to zimbabwes drive to hyperinflation and official dollarization predates the disruption in production caused by the fasttrack land reform. Section three explores the several options that are open to the zimbabwean government in terms of dedollarization and on the basis of the analysis thereof recommends the policy option to be pursued whilst four summarises and ties the arguments. The costs and benefits that developing countries could draw from dollarization. In fact, the allocation of seignorage can be part of com pensation schemes between anchors and clients. Resultantly, smes have been struggling to overcome the effects of currency change or dollarization of the economy mambo, 2010. The analysis of the benefits and costs of dollarization to zimbabwes economy revealed how dollarization has. It shows how dollarization has allowed zimbabwe to quash hyperinflation, restore stability, increase budgetary discipline, and reestablish monetary credibility. The small african nation of zimbabwe gained independence in 1980, and it was in the same year that the zimbabwean dollar replaced the rhodesian dollar at par rate as the official state currency. Currency substitution or dollarization is the use of a foreign currency in parallel to or instead of the domestic currency currency substitution can be full or partial. Chapter 3 assesses competitiveness and external sustainability in debtdistressed zimbabwe. In 2014 there were eight legal currencies us dollar, south african rand, botswana pula, british pound sterling, australian dollar, chinese yuan, indian rupee and. With widespread unofficial dollarization through currency. Zimbabwes historical experience prior to dollarization in 2009, the country was using the zimbabwe dollar pegged against the us dollar. Challenges faced by small to medium scale enterprises.
The impact of dollarization on the zimbabwe economy essay. Past research has concluded that the economic decline of zimbabwe has mainly been caused by poor monetary policies and failure of fiscal policies to control the budget deficit. Zimbabwean dollar was in circulation alongside various other currencies, with. The zimbabwean dollar quickly lost all credibility, and by april 2009, the zimbabwean dollar was suspended entirely, to be replaced by the us dollar in government transactions. Arrangements with the zimbabwe dollar as sole legal tender could be unstable in the absence of a sufficiently long track record of sound policies. The only foreign currency that the government had was from taxation after full dollarisation. In principle, the anchor could return the seignorage to the client. Following dollarization of the economy, local sugar prices are now comparable with regional prices. This paper used both explanatory and empirical approach to explore the nature of currency substitution and dollarisation in zimbabwe. In zimbabwes case, dollarization was the official replacement of the zimbabwean dollar with the u. As the zimbabwean dollar is gradually replaced for daily transactions, the harsh effects of hyperinflation will be mitigated. This research found out that the current multicurrency regime has proved effective in that it has.
Dollarization, human resources, hospitality industry, zimbabwe. Whether the zimbabwean dollar is officially replaced or made obsolete by dollarization, it seems unlikely that zimbabweans will. Rapid dollarization in the economy was accelerated by the exogenous shock caused. Dollarization according to bogetic, 2000, dollarization is the broad use of a foreign currency as the means of exchange for formal or informal transactions. Dollarization and the unbundling of globalization in sub. Guldewolf and others 2004 suggest that dollarization could undermine financial stability through risks associated with liability dollarization, that is, when the increase in local currency value of dollar liabilities exceeds the value of the borrowers income flow. The results of the analysis lead us to conclude that there is a positive impact of dollarization on the zimbabwean tourism industry. Another cost of dollarization is the loss of sei gnorage for the client country. The original presentation has a lot of animations which i dont t slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Pdf dollarization and the zimbabwes economy researchgate. Tourism was examined due to its reach into the zimbabwean economy and as the fastest growing industry worldwide.
The effects of dollarization on human resources in the. The economic decline of zimbabwe gettysburg college. Bouts of hyperinflation are mostly accompanied by rapidly increasing money supply needed to finance large fiscal deficits arising from war, revolution, the end of empires and the establishment of new states. Pdf this paper examines the economic impact of the inception of the full dollarization 1 in zimbabwe s economy after the effects of hyperinflation and an. The analysis of the benefits and costs of dollarization to zimbabwe s economy revealed how dollarization has impacted on the stabilization of zimbabwe s economy. In 2009 zimbabwean government adopted full dollarization as the zimbabwean dollar had become useless as a medium of exchange. An investigation into dollarisation and its impact on. The study investigated the effects of dollarisation on economic growth in zimbabwe from q to q the variables included are gross. There has been general speculation that zimbabwes economic problems are.
Pdf lessons from zimbabwes hyperinflation and dollarization. The system presented and analyzed here is dollarization, which occurs when a country makes a foreign currency currencies full legal tender and reduces its own currency, if any, to a subsidiary roleissued only in coins having small value. Volume 14, number 3 fall 2011 zimbabwes economic crisis originates from its struggle for independence in the 1970s. Liability dollarization can often lead to sudden stops, and to corporate and.
Money demand and seignorage maximization before the end of the. This study examined the effects of dollarization on business in zimbabwe focusing on economic indicators such as inflation rate, gdp, employment and ease of doing business during the period 20092015. The presentation summaries the hyperinflation in zimbabwe, its causes, and possible remedies. Military adventures and reckless spending led to exploding budget deficits, and the forced seizure of commercial farms almost brought the agricultural production to a halt. The impacts of dollarization on zimbabwes tourism industry. Dollarization in tanzania international growth centre. Trade due to the dollarization of the zimbabwean economy, domestic sugar prices were higher than regional market prices. In 2009 the country adopted a multicurrency 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. Money demand and seignorage maximization before the end of. However, this loss is not a social waste, but rather a redistribution between the countries. Pdf the word dollarization has been used to describe the adoption of united. Zimbabwe has been using the us dollar since 2009 when the use of the zimbabwean dollar was abandoned. The official dollarization followed the widespread unofficial dollarization, through currency substitution, and the diminished noteprinting capacity of the rbz after july 1, 2008, when note paper shipments from germany officially ceased. Zimbabwes hyperinflationary past and the stabilization measures taken by the government are outlined, and the consequences defined.
Dollarization is a situation where a country, either officially or unofficially, uses a different countrys currency as legal tender for conducting transactions. In the last decade, good governance and sensible policymaking have been in short supply in harare. In its younger years zimbabwe was seen by many as a contender to give south africa a tough fight for the top spot in africa. Zimbabwean financial institutions now regarding lending to smes in a volatile economy as business suicide have not helped either makina, 2009.
Zimbabwe experienced a very difficult economic phase characterised by hyperinflation, negative economic growth, unavailability of basic commodities and negative economic. This research examined the effect of dollarization on the performance of the zimbabwe stock exchange. Dollarisation in zimbabwe and the death of an industry. Investigating the impact of dollarization on economic. During the inflation period of 1998 2008, domestic output declined so imports became more. This paper examines the impact of dollarization on the performance of the zimbabwean economy from 2003 to 2014 using an interrupted timeseries analysis. Lessons from zimbabwes hyperinflation and dollarization. A series of events that include hyperinflation, macroeconomic instability and currency substitution led to the demise of the zimbabwean dollar which was later suspended indefinitely. This research aimed to closely examine some of these policies that the zimbabwean government implemented, the effects of these policies on economic activity, employment and. Investigating the impact of dollarisation on economic.
Yet dollarization doesnt explain why the country has been growing faster than hong kong, a territory with a stable currency and one of the freest economies in the world. The lavenes test, independent samples test and anova analysis are employed to compare means, before and after dollarization, as well. In zimbabwe s case, dollarization was the official replacement of the zimbabwean dollar with the u. Dollarization definition of dollarization dollarization occurs when a country uses foreign currency in parallel to or instead of the domestic currency. The education system in zimbabwe encompasses years of primary and secondary school and runs. It is important to distinguish between two types of dollarization. The question is whether this economic growth is also being experienced in the tourism industry and whether it can be linked to dollarization. A multicurrency system has been in operation for the last six years, with the south african rand and us dollar in use since 2009 and the chinese yuan, australian dollar, japanese yen and the indian rupee joining the list of accepted currencies. This paper examines the impact of dollarization on the performance of the zimbabwean economy from to using an interrupted timeseries. Zimbabwean dollar in the postindependence period is shown in the timeline on page 10. Some small economies, for whom it is impractical to. A descriptive research design was used in which data was collected from a sample of 183 respondents using questionnaires and interviews. This study investigated the effects of dollarization, which began in 2009, on the zimbabwe. Education in zimbabwe is under the jurisdiction of the ministry of primary and secondary education for primary and secondary education and the ministry of higher and tertiary education, science and technology development for higher education.
An interrupted timeseries analysis raphael tabani mpofu abstract this paper examines the impact of dollarization on the performance of the zimbabwean economy from 2003 to 2014 using an interrupted timeseries analysis. For this system, the practicality of zimbabwe adopting andor implementing dollarization is also explained. This paper explores the definition of dollarization, the zimbabwean situation in depth, the relief and problems of dollarization and finally the way forward on dollarization from this juncture 2. Evidence from zimbabwe stein masunda department of agriculture economics and development, midlands state university, p. Unbundling zimbabwes journey to hyperinflation and. Currency substitution, dollarisation and possibility of dedollarisation in zimbabwe doi.