The Effect of Zimbabwe's Multi-Currency Arrangement on Bilateral Trade: Myth Versus Reality

Steven Buigut
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Steven Buigut: School of Business, American University in Dubai, Dubai, UAE

International Journal of Economics and Financial Issues, 2015, vol. 5, issue 3, 690-700

Abstract: To tame the hyperinflation experienced in the country, Zimbabwe adopted a relatively unique solution by implementing a multi-currency system in January 2009. Five foreign currencies were granted official status. However, this arrangement is viewed as a temporary measure to restore stability and there is no commitment by authorities to maintain it long-term. The present study uses a theoretically consistent gravity model that accounts for endogeneity, to estimate the effect of the multi-currency arrangement implemented in Zimbabwe on bilateral trade. The period covered by the study is from 2004 to 2012 using a total of 50 potential trading partners from Africa, Asia, Western Europe, Eastern Europe, North and South America. The results suggest that the multi-currency arrangement as adopted has depressed Zimbabwe's bilateral trade by nearly 15%.

Keywords: Multi-Currency Regime; Gravity Model; Trade; Zimbabwe (search for similar items in EconPapers)
JEL-codes: F14 F15 F33 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2015-03-08

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