Zimbabwe’s Unorthodox Dollarization

Erik Bostrom
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Erik Bostrom: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

No 85, Studies in Applied Economics from The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

Abstract: From 2007-2009 Zimbabwe underwent a hyperinflation that culminated in an annual inflation rate of 89.7 sextillion (10^21) percent. Consequently, the government abandoned the local Zimbabwean dollar and adopted a multi-currency system in which several foreign currencies were accepted as legal tender. The most prevalent currency in that system is the U.S. dollar. Without official recognition of dollarization, however, the government enacted laws allowing Zimbabwe to evade the budgetary discipline required from dollarized economy, exposing itself to more potential monetary crises. This paper highlights important Zimbabwean government actions post-April 2009 and analyzes their effects on the Zimbabwean economy. It also explains Zimbabwe’s general financial situation and the major reforms needed to avoid another crisis.

Keywords: Zimbabwe; hyperinflation; dollarization; government finance (search for similar items in EconPapers)
JEL-codes: E59 O23 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2017-09
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jhisae:0085

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