Money demand and seignorage maximization before the end of the Zimbabwean dollar

Stephen Matteo Miller and Thandinkosi Ndhlela

Journal of Macroeconomics, 2020, vol. 63, issue C

Abstract: The delayed end to Zimbabwe's hyperinflation in 2009 gave rise to an official dollarization. Before then, the Reserve Bank of Zimbabwe (RBZ) operated on the correct side of the inflation tax Laffer curve. Estimated seignorage maximizing rates derive from Bayesian, time-varying parameter, structural vector autoregressions. Monthly changes in the ratio of prices for the Old Mutual insurance company's shares, which trade in London and Harare, serve as the measure of inflation from 1999 to 2008. Orthogonalized impulse response functions indicate that monthly seignorage maximizing rates ranged from 242% to 315% and exceeded all monthly inflation rates.

Keywords: Cagan's Paradox; Hyperinflation; Money demand; Seignorage maximization; Bayesian time varying parameter structural vector autoregressions (search for similar items in EconPapers)
JEL-codes: E02 E31 E41 E58 E62 E65 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:63:y:2020:i:c:s0164070419300539

DOI: 10.1016/j.jmacro.2019.103186

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