Zimbabwe: A Quest for a Nominal Anchor

Arto Kovanen

No 2004/130, IMF Working Papers from International Monetary Fund

Abstract: This study examines the appropriateness of alternative intermediate monetary policy targets for Zimbabwe in light of the stability of the demand for money and the information content of financial variables for predicting price level movements. Results of the study indicate that a well-defined long-run demand relation exists for currency in circulation, but not for other monetary aggregates. Currency in circulation has strong information content for predicting future price level movements. The information content of other financial variables, such as the exchange rate and interest rates, is weaker. Statistical relationships break down of the outset of high inflation.

Keywords: WP; exchange rate; price level; Monetary policy; demand for money; nominal anchors; and inflation; currency depreciation; reserve money granger; consumer price inflation; narrow money; currency demand; year-on-year inflation; crawling-peg exchange rate regime; price level variance; innovation affect inflation; money demand relation; Inflation; Currencies; Exchange rates; Depreciation; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 41
Date: 2004-07-01
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Citations: View citations in EconPapers (6)

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