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. Oct 01, 2019 dollarization is a situation where a country, either officially or unofficially, uses a different countrys currency as legal tender for conducting transactions. Dollarization means more than merely the adoption of a foreign currency. 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, dollarisation and possibility of dedollarisation in zimbabwe 1wellington garikai bonga, 2netsai lizzy dhoro abstract. The impacts of dollarization on zimbabwes tourism industry. In fact, the allocation of seignorage can be part of com pensation schemes between anchors and clients.
The sample is made up of sixty two listed companies that make up the zimbabwe stock exchange industrial index, which is used as the benchmark index. Commerce and services grow rapidly in zimbabwe, encouraged by dollarization. During this time, it was subject to periods of aboveaverage inflation, followed by a period of hyperinflation the zimbabwean dollar was introduced in 1980 to directly replace the rhodesian dollar which had been introduced in. Financial crises, dollarization, and lending of last resort in open economies luigi bocolay guido lorenzoniz november 2019 abstract foreign currency debt is perceived as a source of. Another cost of dollarization is the loss of sei gnorage for the client country. Dollarisation in zimbabwe pdf admin january 21, 2020 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. Investigating the impact of dollarisation on economic growth. Dollarization can occur unofficially, without formal legal approval, or it can be official, as when a country ceases to issue a domestic currency and uses only foreign currency. Pdf this paper examines the economic impact of the inception of the full dollarization 1 in zimbabwes economy after the effects of. Full dollarization is the most direct, irreversible, and credible way of bringing about tighter trade and financial integration bogetic 2000. Quispeagnoli, 2002 that is the unofficial dollarization, semi official dollarization and official dollarization. Zimbabwes moves to end dollarization challenged in court. Sep 24, 2019 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.
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. An investigation into dollarisation and its impact on tourism. We study the impact of financial dollarization, differentiating across foreign currency deposits and credit on financial depth, access and efficiency for a. Dollarization can also involve the euro being adopted by noneu member countries or the pound sterling being used by some other country. In principle, the anchor could return the seignorage to the client. In zimbabwe all the three types of dollarization were. The new monetary liabilities issued by the government come in. Rapid dollarization in the economy was accelerated by the exogenous shock caused.
Several countries have already officially adopted the us dollar as legal tender. In its younger years zimbabwe was seen by many as a contender to give south africa a tough fight for the top spot. Zimbabwe can be classified as a dollarized economy due to the prevalence and priority given to the u. Linking zimbabwe s business cycle, even in the period of global recession, is a reality far rosier than the ignoble isolation of the zimbabwe dollar era. Dollarisation in zimbabwe and the death of an industry. The costs and benefits that developing countries could. Introduction and background zimbabwe s drive to hyperinflation and the eventual adoption of a multicurrency system, henceforth referred to as a dollarization in february 2009, is well documented in literature. However, this loss is not a social waste, but rather a redistribution between the countries. Mar 22, 2011 linking zimbabwe s business cycle, even in the period of global recession, is a reality far rosier than the ignoble isolation of the zimbabwe dollar era. Unbundling zimbabwes journey to hyperinflation and official. Pdf the impacts of dollarization on zimbabwes tourism.
During the inflation period of 1998 2008, domestic output declined so imports became more. Investigating the impact of dollarization on economic. Zimbabwes historical experience prior to dollarization in 2009, the country was using the zimbabwe dollar pegged against the us dollar. This is because dollarization forms a stable relationship with a currency whose reputation is already well established and secure. An investigation into dollarisation and its impact on. The term dollarization is shorthand for the use of any foreign currency by another country.
Evidence show that in 2007 the commercial bank prime lending rate was 578. Since the official adoption of dollarization, zimbabwe is largely a cashbased economy, with a huge amount of u. Dollarization comes in two forms the official and the unofficial dollarization. The study investigated the effects of dollarization on economic growth in zimbabwe from. This paper analyses the effects of the dollarization of the zimbabwean economy in 2009, in the wake of devastating hyperinflation and a. Apr 20, 2019 dollarisation in zimbabwe pdf admin april 20, 2019 leave a comment 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. Zimbabwe experienced a very difficult economic phase characterised by hyperinflation, negative economic growth, unavailability of basic commodities and negative economic. How dollarisation has contributed to the zimbabwean economy. 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 between 2000 and 2008. As a result of this spontaneous dollarization, along with the installation of a new national unity government, the economy rebounded and international trust in zimbabwe began to be restored. This is the situation where the country officially uses the u. 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.
Jun 25, 2019 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. Governments which end up dollarising only do so as a last resort. Second, dollarization can also establish a firm basis for a sounder financial sector. International monetary fund, publication services p. Pdf dollarization and the zimbabwes economy researchgate. Zimbabwe s hyperinflationary past and the stabilization measures taken by the government are outlined, and the consequences defined.
Another unusual case is that of dollarization that occurred in zimbabwe. It also means financial integration with the united states, which will force domestic financial institutions to. Dollarization helped zimbabwe arrest hyperinflation, among other. While the sub objectives of the study are summarised under the following hypotheses. Problems arising from a lack of financial integration, an error in the choice of currency to dollarize under, and the inability of the government to enter into a formal. Dollarization helped zimbabwe arrest hyperinflation. In 2009 zimbabwe, in a bid to save the nation from hyperinflation, abandoned her local currency and adopted a multicurrency system which has become formally known as dollarization sikwila, 20. A series of events that include hyperinflation, macroeconomic instability and. May 27, 2019 effects of dollarisation in zimbabwe pdf abstract.
The african union and specifically, the southern africa development community should look at these policy issues very closely in order to provide policy direction to its member states. The issues it raises are identical for the other countries in the region using the south african rand, for example. Social unrest in the capital, quito, highlights discontent with the governments currency policies. Zimbabwe 199020 john davison gondwe nhavira, university of zimbabwe, zimbabwe. Some small economies, for whom it is impractical to. Dollarization is a situation where a country, either officially or unofficially, uses a different countrys currency as legal tender for conducting transactions. Threats and opportunities facing banking institutions in. With that, zimbabwe abandoned dollarization and started to issue its own money. The dollarized country, i maintain, can count on the implicit support of the u. It also means financial integration with the united states, which will force domestic financial institutions to improve their efficiency and the quality of their services. In considering this choice of exchange regime, two points are important to keep in mind. Or real estate that commercialized houses in that currency.
In zimbabwe s case, dollarization was the official replacement of the zimbabwean dollar with the u. International monetary fund, april 2015 publication orders may be placed online, by fax, or through the mail. The presentation summaries the hyperinflation in zimbabwe, its causes, and possible remedies. Apr 21, 20 it shows how dollarization has allowed zimbabwe to quash hyperinflation, restore stability, increase budgetary discipline, and reestablish monetary credibility. Other drawbacks to dollarization became apparent during its implementation. 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. Dollarisation can be a path to economic stability and growth if managed properly. Igal magendzo central bank of chile november, 2001 abstract in this paper we analyze the macroeconomic record of dollarized economies. Dollarization era ephraim matanda, faculty of commerce, department of banking and finance, great zimbabwe university, zimbabwe. In zimbabwes case, dollarization was the official replacement of the zimbabwean dollar with the u.
This paper used both explanatory and empirical approach. The results of the analysis lead us to conclude that there is a positive impact of dollarization on the. 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. The impacts of dollarization on zimba bwes tourism industry. The sage encyclopedia of business ethics and society.
What are the effects of relying on dollarization in zimbabwes ease of. Financial crises, dollarization, and lending of last. Zimbabwe abandoned its local currency in 2009 after it had been ravaged by hyperinflation which topped 231 million and introduced a basket of foreign currencies. 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. Dollarisation in zimbabwe pdf dollarisation in zimbabwe pdf june 25, 2019 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. Dec 27, 2019 effects of dollarisation in zimbabwe pdf abstract. For example, in ecuador annual inflation rate declined from over.
Pdf lessons from zimbabwes hyperinflation and dollarization. Rapid dollarization in the economy was accelerated by the exogenous shock caused by the injection of cash dollars into the zimbabwean economy. Introduction in the last few years, the idea of dollarization has surged to the forefront of monetary policy alternatives for latin american countries. A zimbabwe human rights lawyer asked the high court on tuesday to overturn a government decision to ban the use of foreign currencies, a move that could potentially derail plans for a new currency. This paper examines the impact of dollarization on the performance of the zimbabwean economy from 2003 to 2014 using an interrupted timeseries analysis. The challenges led the country to adopt a multicurrency system in 2009 post dollarization. Costs and benefits of dollarization myriam quispeagnoli. Dollarization continues the process of foreign indebtedness and colonial dependency, with the longknown outcomes of poverty and social inequality, assert activists in ecuador.
Rapid dollarization in the economy was accelerated by the exogenous shock caused by the injection of cash dollars into the zimbabwean economy, mostly from international transfers. A handsoff approach to currency management has served. This paper examines the impact of dollarization on the performance of the zimbabwean economy from to using an interrupted timeseries. Department of banking and finance, great zimbabwe university, masvingo, zimbabwe the paper presents and examines the impact of dollarization on growth and development of emerging economies with specific reference to zimbabwe s experience in the period, 20092018. Evidence from zimbabwe stein masunda department of agriculture economics and development, midlands state university, p. Investigating the impact of dollarisation on economic. This case study of zimbabwe s hyperinflation and subsequent dollarization provides lessons for other developing economies about conducting monetary policy and the impact of full dollarization.
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 are analyzed. It provides a politicaleconomic analysis of zimbabwes history. On the other hand, there is also a downside to dollarization. Doc effects of dollarization on zimbabwe business growth.
Hyperinflation in zimbabweits causes, current situation and possible solutions 2. May 01, 2020 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. We build a model in which liability dollarization arises from the insurance motive of domestic savers. The effects of dollarization on human resources in the.
Zimbabwes hyperinflationary past and the stabilization measures taken by the government are outlined, and the consequences defined. Jan 21, 2020 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. Although zimbabwe has followed many of the steps required for complete dollarization, three broad areas still stand out as problematic, resulting in zimbabwe s unorthodox dollarization status. A handsoff approach to currency management has served zimbabwe well since 2009, but a number of risks are beginning to emerge as the economy has slowly.
There is a consensus in the literature that both official dollarization and official semi dollarization can succeed in fighting hyper inflation and bring about economic stabilization. Pdf the impacts of dollarization on zimbabwes tourism industry. Dollarization occurs when residents of a country extensively use foreign currency alongside or instead of the domestic currency. Zimbabwe food security brief page 4 the following definitions guide the analysis of the food security brief. Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. Apr 26, 2019 dollarisation in zimbabwe pdf april 26, 2019 by admin 0 comments 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.
It shows how dollarization has allowed zimbabwe to quash hyperinflation, restore stability, increase budgetary discipline, and reestablish monetary credibility. Masum 45e zr 04 8 15muhammad maqsud hussain 45e zr 16 22fardin humayun 45e zr 25 23 31dipankar ghosh 45e zr 36 36 38hasnat imtiaz uddin ahmed 45e. The impacts of dollarization on zimbabwes tourism industry core. 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. University of zimbabwe dollarization and economic growth in. This affected organizations as they could not find funds for recapitalization or investment.
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