Effects of hyperinflation on stock market performance: case of Zimbabwe
- Authors: Mutandwa, Tsitsi Hope
- Date: 2010
- Subjects: Stocks--Zimbabwe , Stock exchanges--Zimbabwe , Inflation targeting--Zimbabwe
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/24980 , vital:63768
- Description: In this study an analysis of the long-term equilibrium relationship between inflation, selected macroeconomic variables and the Zimbabwe stock market (represented by market capitalization) is explored. Using stock market capitalization as a proxy for stock market performance is important for an investigator since it can capture movements in the whole market. The link between stock market performance and macroeconomic variables in particular inflation is well-documented in the literature. However, a void in the literature relates to examining the cointegration between hyperinflation and stock market performance. Although hyperinflation is nothing more than inflation at high rates, clarity on this point is necessary because of the seemingly unclear nature of the relationship in the literature. Inflation has mostly been documented as negatively impacting on financial markets. This is not so clear when it comes to hyperinflation. The Zimbabwean stock market has performed well during the high inflation period. This then raises the question: Does hyperinflation stimulate the growth of the stock market? The analysis is undertaken by employing cointegration and vector error correction modeling approach using quarterly data for the period 1980-2007 Our results show among others, that hyperinflation has impacted negatively on the growth of the stock market in Zimbabwe. However, other driving factors such as foreign direct investment and relatively high bank lending rates may have fuelled the observed growth in the stock market during the period of study. , Thesis (MCom) -- Faculty of Management and Commerce, 2010
- Full Text:
Implications of a currency board arrangement for the Zimbabwean economy: the lessons of experience
- Authors: Ndlovu, Edwin
- Date: 2010
- Subjects: Economic indicators , Inflation targeting , Foreign exchange
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10353/26492 , vital:65480
- Description: Inflation is one of the most important factors for gauging the health of the economy. For production, employment and trade to take place, it is crucial that inflation be low and stable. This study analyses the implications of a currency board system in a hyperinflationary economy, using quarterly Zimbabwean data covering the period 1995 to 2008.An empirical model linking inflation to its identified theoretical determinants is specified. The study employs a cointegration and a vector error correction (VEC) modeling, to provide robust long run and short run dynamic effects of hyper inflation on the economy. The empirical findings reveal a strong significant relationship between inflation and government deficit, expected inflation, money supply growth and the exchange rate. These results corroborate the theoretical predictions and the previous findings that most hyperinflations are deficit-induced. The study thus suggests an implementation of a currency board arrangement for Zimbabwe to eradicate hyperinflation based on its link with exchange rate, money supply and government deficit. A currency board restrains the tendency by most central banks to create money to finance government deficits, and reduces expectations of rising inflation through its instantaneous credibility in reducing inflation. , Thesis (MCom) -- Faculty of Management and Commerce, 2010
- Full Text: