FACTORS THAT IMPEDE VIABLE BOND MARKET DEVELOPMENT IN ONE HYPERINFLATIONARY ECONOMY

Dennis Sibanda and Job Dubihlela

Review of Business and Finance Studies, 2013, vol. 4, issue 1, 107-118

Abstract: This study offers an assessment of the viability of the fixed income securities market for one hyperinflationary economy since 1997 when its financial market took a volatile shape. The financial sector (banks) continues to grapple in trying to address inflationary pressures, while long term lending for capital development (bond market) including the secondary market is struggling to take off the ground. The combined effects of short-term interest rate volatility, political instability and hyperinflation in the Zimbabwean economy led to great uncertainty in its securities market and consequently, to unstable bond market. Data were collected through secondary sources and additionally, surveys were carried out; shows that inflation is the main factor contributing to the uncontrollable volatility of short term interest rates. The subsequent effect of inflationary pressures increased uncertainty in pricing of long term securities such as bonds. Empirical findings, expert advice, facts and opinions were used, with recommendations on what needs to be done to salvage the securities market in Zimbabwe, and to create a viable and stable fixed income market (imperative for capital investment and infrastructure development).

Keywords: Rules versus Discretion; Stabilization; Treasury; Bond market; Hyper-inflation; Financial Markets; Market volatility; Interest rates; Zimbabwe (search for similar items in EconPapers)
JEL-codes: E6 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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