Pdf the word dollarization has been used to describe the adoption of united. Dollarization, inflation and interest rate in nigeria. We argue that the fall in price dispersion is not a product or a southern africa region effect. He found that dollarization led to low inflation, clarity in price, emergence of financial institution and fiscal discipline in zimbabwe during the period.
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. Evidence show that in 2007 the commercial bank prime lending rate was 578. Like ecuador and salvador, zimbabwe shifted to the usd as the official currency in which trade is conducted. Zimbabwe ends decade of dollarization in new currency. Dollarisation in zimbabwe and the death of an industry.
The effect of dollarization on the growth of nonperforming. Dollarization has been driven by the longlasting civil conflict and the significant. An investigation into dollarisation and its impact on tourism. Gerald kadira 1 charlene january plaxedes gochero 1,2 1. The analysis suggests that some form of official dollarization has significant advantages. The first section of this paper will examine the pros and cons of dollarization from the point of view of the dollarizing country. The results of the analysis lead us to conclude that there is a positive impact of dollarization on the zimbabwean tourism industry. Zimbabwe experienced a very difficult economic phase characterised by hyperinflation, negative economic growth, unavailability of basic commodities and negative economic. Aug 09, 2018 moreover, replacing a countrys failed currency with a reserve currency such as the dollar so called dollarization is not as easy as it sounds.
How dollarisation has contributed to the zimbabwean economy. Investigating the impact of dollarisation on economic growth. The term of financial dollarization, that was created in recent years therefore refers to both, the holding of foreign currency denominated assets and liabilities denominated in foreign currency. Thezimbabwean government had no any other solutions to their problems other than printing more money with additional zeros. Thus, in this paper the term dollarization and multicurrency will.
The situation has worsened despite the dollarization of the economy. 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. 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. Investigating the impact of dollarisation on economic. Determinants and effect of commercial bank profitability. Review of literature dollarization is an exchange rate system that can be equated to a fixed exchange rate regime though there are acute differences. At independence in 1980 the zimbabwe dollar replaced the rhodesian dollar at par at a rate which was higher than the american dollar.
A critical analysis of the survival strategies used by. This is specially relevant for the countries included in this book, as residents in asean economies in transition save and. The graph above shows the trend of gdp growth of the zimbabwean economy since 1980. The impacts of dollarization on zimbabwes tourism industry. Zimbabwe s economy was set on a downward spiral by a number of factors. Zimbabwe 199020 john davison gondwe nhavira, university of zimbabwe, zimbabwe. Investigating the impact of dollarisation on economic growth a. In order to see the effect dollarization has in a countrys growth, they use an outcome equation and an equation on the probability of being a dollarized country p.
A handsoff approach to currency management has served. This study examined the effects of dollarization on business in zimbabwe focusing on economic indicators such as inflation rate, gdp. 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. According to mhute 2012 an immediate and noticeable effect of dollarization was price stability and reduced hyperinflation and after the dollar was introduced, inflation in zimbabwe remained in single digit figures, and was even negative at the beginning of 2009 and if we. Zimbabwe ends decade of dollarization in new currency reform.
According to mhute 2012 an immediate and noticeable effect of dollarization was price stability and reduced hyperinflation and after the dollar was introduced, inflation in zimbabwe remained in single digit figures, and was even negative at the beginning of 2009 and if we also look at the businesses were better able to plan because there was more predictability of key. Another effect of a country adopting a foreign currency as its own is that the. Apr 24, 2020 effects of dollarisation in zimbabwe pdf. Masasi college,4 churston close marlborough, harare abstract with the objective to establish determinants and effects of profitability in zimbabwean commercial banks for the. An investigation into dollarisation and its impact on. Jun 24, 2019 zimbabwe made its interim currency the countrys sole legal tender on monday, ending a decade of dollarization and taking a another step towards relaunching the zimbabwean dollar. Dollarization and the zimbabwe s economy zimbabwe has a population of approximately million people. Dollarisation in zimbabwe and the death of an industry rory pilossof zimbabwe s entwined political and econ omic crises, which until recently have shown little signs of abating, have wreaked havoc on the once prosperous nation. Great zimbabwe university, masvingo, zimbabwe abstract this research evaluates the effect of dollarization and internal bank factors that caused unprecedented high levels of nonperforming loans npls in the zimbabwe banking system. This paper analyses the effects of the dollarization of the zimbabwean economy in 2009, in the wake of devastating hyperinflation and a political crisis that reached its zenith. Dollarization the use of foreign currencies as a medium of exchange, store of value, or unit of accountis a. Positive effects was written and submitted by your fellow student.
Price adjustment after hyperinflation in zimbabwe nyawo 2020. 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. Jun 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. 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 19982008. Thus, in this paper the term dollarization and multicurrency will be used interchangeably. Mar 27, 2020 it shows how dollarization has allowed zimbabwe to quash hyperinflation3, restore stability, increase budgetary discipline, and reestablish monetary credibility. This is because dollarization forms a stable relationship with a currency whose reputation is already well established and secure. However, the practice is the same as in any dollarized economy. In addition to these general benefits, however, there will also be more specific effects some positive, some negative for each side.
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. Commerce and services grow rapidly in zimbabwe, encouraged by dollarization. Quispeagnoli, 2002 that is the unofficial dollarization, semi official dollarization and official dollarization. Unbundling zimbabwes journey to hyperinflation and official. The costs and benefits that developing countries could draw. The paper also discuss the possibility and the requirements for dedollarisation to take place.
First, from both economic and statistical relevance, the social and political dimensions of globalization constitute the key dollarization amplifiers, while the explanatory power of the economic component is weaker on dollarization. As the policy debate in the last couple of years has focused on financial dollarization, we. The study aims to establish the effects of dollarisation on the zimbabwean economy covering a period of 28 years from 1990 to 2017. The effects of dollarisation to the zimbabwean economy 19902017. Pdf an overview of the economic causes and effects of.
On the other hand, there is also a downside to dollarization. Investigating the impact of dollarization on economic. The study investigated the effects of dollarization on economic growth in zimbabwe from q1. Dollarization and the unbundling of globalization in sub. About help faqs contact us print citation alert off. In 2008 in an 18month experiment, foreign currency was accepted as legal tender for transactions with a set.
How dollarisation has contributed to the zimbabwean. You are free to use it for research and reference purposes in order to write your own paper. Does dollarisation influence economic activity in zimbabwe. 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. Currency substitution, dollarization see english spelling differences is the use of a foreign. The effects of dollarization may change from time to time, as has been the case for zimbabwe where. This has also allowed the banks to resume interbank lending. Apr 22, 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. Using the tobit regression approach, the following findings are established. An analysis of the pre and post dollarisation era in zimbabwe mdpi.
Policymakers must, therefore, critically look at the impact that it has on a country. Determinants and effect of commercial bank profitability in. Multicurrency, hyperinflation, dollarization, currency board, free banking. The effects of dollarization may change from time to time, as has been the case for zimbabwe. Or real estate that commercialized houses in that currency. The effects of dollarization may change from time to time, as has been the case for zimbabwe where inflation was arrested in 2008 at the inception of dollarization and hence the need for policies to be put in place to promote economic growth and development.
The study investigated the effects of dollarisation on economic growth in zimbabwe from q to q the variables included are gross domestic. Dollarization in zimbabwe has a basket of currencies as anchor currencies with the rand as the reference currency, hence the term multicurrency system. The flip side of dollarisation the herald zimbabwes. The costs and benefits that developing countries could. Implications for the partners are as much political as economic. The process of dollarization in zimbabwe was peculiar in that it was not backed by international reserves as is normally the case with countries that have. 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 unprecedented depreciation of an exchange rate. Arrangements with the zimbabwe dollar as sole legal tender could be unstable in the absence of a sufficiently long track record of sound policies. This article was downloaded from harvard universitys dash. For over a decade and before the adoption of dollarization, the countrys. University of zimbabwe, box mp 167, mount pleasant, harare 2. May 26, 2020 this essay on dollarization in zimbabwe. Investigating the impact of dollarization on economic growth.
The variables included are gross domestic product per capita gdpp, interest rates lending, trade openness, gross domestic investment and dollarization. In 2006 i arrived in the capital city of harare, zimbabwe for the first time, after many years of research into this fascinating, if beleaguered country. Zimbabwe to succeed the current multicurrency system, which the authorities consider a temporary arrangement. Zimbabwes currency crisis munich personal repec archive.
As a result, external investors lost confidence in the currency, the zimbabwe dollar lost 71. This paper examines the impact of dollarization on the performance of the zimbabwean economy from 2003 to 2014 using an interrupted timeseries analysis. While specific policy is needed to deal with the risks associated with dollarization, the underlying causes of unwanted dollarization should also be tackled. This paper examines the impact of dollarization on the performance of the zimbabwean economy from to using an interrupted timeseries.
The results gathered from this research shows that dollarization has enhanced the performance of the zse. Mar 28, 2014 it will probably take many years before the effects of dollarization in zimbabwe can be fully catalogued and understood, but so far the results have been clearly mixed. Pdf the impacts of dollarization on zimbabwes tourism industry. 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. The impact of dollarization on the zimbabwe economy essay. Analysis of the impact of dollarization on zimbabwes international trade flows. One of the most notable effects of the recent financial sector liberalization in. Available literature on dollarization in nigeria looked at dollarization and. Rapid dollarization in the economy was accelerated by the exogenous shock caused by the injection of cash dollars into the. Shares prices have stabilized as compared to the pre dollarization era where they would change a number of times in one day. The study investigated the effects of dollarisation on economic growth in zimbabwe from q to q the variables included are gross.
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