The new regime brought with it benefits to the economy and helped restart financial intermediation. Challenges and policy options after hyperinflation 4 exchange trading takes place in u. In addition to these general benefits, however, there will also be more specific effects some positive, some negative for each side. It shows how dollarization has allowed zimbabwe to quash hyperinflation, restore stability, increase budgetary discipline, and reestablish monetary credibility. The effects of dollarisation to the zimbabwean economy. According to the tests conducted, it was found that dollarization did introduce some macroeconomic stability in zimbabwe although a few key macroeconomic variables showed a sustained improvement. Since this has been in place over the last five years, it was therefore decided to compare the effects of dollarization over a five year period and compare that to previous five year periods when the zimbabwe dollar was in use. An overview of the economic causes and effects of dollarisation. Pdf dollarization and the zimbabwes economy researchgate. Investigating the impact of dollarization on economic growth.
Dedollarizing the economy today would trigger market uncertainty and lead to economic instability, which would inevitably hurt. The flip side of dollarisation the herald zimbabwes. Dollarization is not a sole remedy for all economic problems, but neither is having a national currency. An investigation into dollarisation and its impact on tourism and. The impacts of dollarization on zimbabwes tourism industry. Lessons for zimbabwe joe muzurura chinhoyi university of science and technology abstract when zimbabwe abandoned its currency and adopted the multiple currency exchange rate system in 2009 which was anchored on the united states dollar, there was general consensus that dollarization was the only way the. The effects of dollarization may change from time to time, as has been the case for zimbabwe where inflation was arrested but policies need to be put in place to promote economic growth. Investigating the impact of dollarization on economic. Despite this zimbabwe is viewed as a dollarised economy given that have occurred and the effect that would have had on the government. Rapid dollarization in the economy was accelerated by the exogenous shock caused by the injection of cash dollars into the zimbabwean economy. The study aims to establish the effects of dollarisation on the zimbabwean economy covering a period of 28 years from 1990 to 2017. Chidakwa management college of southern africa mancosa, south africa 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. The results of the analysis lead us to conclude that there is a positive impact of dollarization on the. At independence in 1980 the zimbabwe dollar replaced the rhodesian dollar at par at a rate which was higher than the american dollar.
Ten implications of dedollarization and introduction of. However, months later, in march of 2009, the then acting. This paper analyses the effects of the dollarization of the zimbabwean economy in 2009, in the wake of devastating hyperinflation and a. This saw the zimbabwe stock exchange start to quote prices of shares in the united states dollar usd. In an attempt to answer this question, the study used an auto regressive distributive lag ardl procedure, to investigate the effects of dollarisation on economic growth in zimbabwe. Effects of multicurrency dispensation southern eye. A better understanding of dollarization in ssa may thus help to assess potential vulnerabilities and the case for the. However, after years of turmoil and crisis, a significant breakthrough on the political front was achieved earlier. The series of events that caused dollarisation are examined, as are the effects this has had on the economy. Pdf zimbabwe acquired its independence on 18 april 1980.
In zimbabwe s case, dollarization was the official replacement of the zimbabwean dollar with the u. An investigation into dollarisation and its impact on. This study investigated the effects of dollarization, which began in 2009, on the zimbabwe. Data sources all data is from the zimbabwe tourism authority tourism trends and statistics from 1999 to 2011 available freely from zta. Zimbabwe 199020 john davison gondwe nhavira, university of zimbabwe, zimbabwe. Dollarisation in zimbabwe and the death of an industry. Implications for the partners are as much political as economic.
Evidence from zimbabwe stein masunda department of agriculture economics and development, midlands state university, p. Pdf an overview of the economic causes and effects of. The country first breached the benchmark for hyperinflation in march 2007 when it rose above the 50% threshold brulliard, 2008. I thought it will be prudent to look at the cost benefit analysis of dollarisation and our way out. Pdf this paper examines the economic impact of the inception of the full dollarization 1 in zimbabwes economy after the effects of. Examining the effects of dollarization on ecuador coha.
R979320n dissertation submitted in partial fulfilment of the requirements of the master of science degree in economics may 2017. 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. As surprising as it may sound, zimbabwe was one of subsaharans most successful countries. Does dollarisation influence economic activity in zimbabwe. However, hyperinflation4 eroded the value of the zimbabwe currency.
The first section of this paper will examine the pros and cons of dollarization from the point of view of the dollarizing country. Pdf the impacts of dollarization on zimbabwes tourism industry. Introduction the effect of dollarization on real macroeconomic variables such as employment, growth and inflation is debatable and inconclusive. Investigating the impact of dollarisation on economic. The impact of multicurrency system on the viability of.
The actions taken by the inclusive government to end the tyranny of hyperinflation are outlined, and the consequences of the decision to allow choice in currency. This paper examines the economic impact of the inception of the full dollarization 1 in zimbabwes economy after the effects of hyperinflation and an unprecedented depreciation of an exchange rate. Dollarization can be defined as the situation in which a foreign country or its citizens decide to use a foreign currency such as the u. The study employed quarterly data over a 14year period between. Zimbabwe experienced a very difficult economic phase characterised by hyperinflation, negative economic growth, unavailability of basic commodities and negative economic growth rates during the. Currency substitution, dollarisation and possibility of dedollarisation in zimbabwe doi. Causes and effects of dollarisation in zimbabwe the major causes of hyperinflation that lead zimbabwe to dollarise its economy include money printing seigniorage, foreign currency shortages with their resultant black market premium, demand pullinflation due to disrupted production. What are the advantages and disadvantages of dollarization. Currency substitution, dollarisation and possibility of dedollarisation in zimbabwe according to joseph noko 2011, by 2003, the zimbabwe dollar had deteriorated to the point where the cost of issuing it in the form of regular notes and coins was greater than the face value, resulting in the government issuing the zimbabwe dollar by way of.
In its younger years zimbabwe was seen by many as a contender to give south africa a tough fight for the top spot in. The study employed autoregressive distributed lag ardl model to establish the short and long run relationship between dollarisation, financial performance indicators fpis inflation, foreign direct investment, trade openness and gross domestic product and non. Dollarisation in zimbabwe and the death of an industry rory pilossof zimbabwes entwined political and econ omic crises, which until recently have shown little signs of abating, have wreaked havoc on the once prosperous nation. Doc effects of dollarization on zimbabwe business growth. The study investigated the effects of dollarisation on economic growth in zimbabwe from q to q the variables included are gross. Empirical evidence on this relationship does not support the assertion that an exchange rate regime is critical for economic growth eichengreen, 2001.
The government of zimbabwe adopted a multiple currency regime in january 2009 after a decade of economic decline. How dollarisation has contributed to the zimbabwean economy. Zimbabwe will again have a useless and debauched currency which only. When zimbabwe adopted the multicurrency system in february 2009. Dollarization is a situation where a country, either officially or unofficially, uses a different countrys currency as legal tender for conducting transactions. In 2008 in an 18month experiment, foreign currency was accepted as legal tender for transactions with a set. Both supporters and opponents of dollarization have overstated the policys effects on the ecuadorian economy. This research examined the effect of dollarization on the performance of the zimbabwe stock exchange. University of zimbabwe faculty of social studies department of economics investigating an effective dedollarisation strategy for zimbabwe august 2015 to may2017 student no. This study examined the effects of dollarization on business in zimbabwe focusing on economic indicators such as inflation rate, gdp.
The impact of dollarization on the zimbabwe economy essay. Pdf this paper examines the economic impact of the inception of the full dollarization 1 in zimbabwes economy after the effects of hyperinflation and an. Zimbabwes exports and the crisis global and contagion effects from rsa preliminary evidence suggests that africas merchandise exports have already suffered an important drop in value during the first part of 2009. Background zimbabwe is a landlocked country with a population of approximately thirteen million people, and 80 percent of them live in the rural areas zimstat, 2012. Case of zimbabwe article pdf available in mediterranean journal of social sciences 57. An investigation into dollarisation and its impact on tourism and poverty. The year 2009 is identified as the time of dollarization since it is the time the economy was officially dollarized. 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 study focused on analysing what the impact of dollarization. Despite these benefits, many banks are facing challenges of liquidity risk. Witness zimbabwe, which as recently as july 2008 was experiencing inflation at an annual rate of 231 million percent. The question has incited a lot of debates among researchers and analysts. Investigating the impact of dollarisation on economic growth a. Analysts say zimbabwe reached its rock bottom in the 10 years but due to the negative effects of the us dollar the economy is expected to go down again and then. In 2008 in an 18month experiment, foreign currency was accepted as legal tender for transactions with a set number of retailers. The study investigated the effects of dollarization on economic growth in zimbabwe from. This paper empirically investigates the determinants of zimbabwean commercial banks liquidity risk after.