The effects of hyperinflation on the Zimbabwean construction industry
- Authors: Moyo, Admire
- Date: 2010
- Subjects: Inflation (Finance) -- Zimbabwe , Zimbabwe -- Economic conditions , Construction industry -- Economic aspects -- Zimbabwe
- Language: English
- Type: Thesis , Masters , MA
- Identifier: vital:9687 , http://hdl.handle.net/10948/1197 , Inflation (Finance) -- Zimbabwe , Zimbabwe -- Economic conditions , Construction industry -- Economic aspects -- Zimbabwe
- Description: Less than two decades ago, Zimbabwe was a symbol for the rest of the world of what Africa could become (Dell, 2005). DiSilvio (2007) contends that independent Zimbabwe was an economic success on route to attaining status of the most “developed country” in Africa. Contrary to expectations, by 2003 the Zimbabwean economy was shrinking faster than any other economy in the world at 18 percent per year (Richardson, 2005). Reports indicate that the Zimbabwean economy is in crisis and has since been set back by more than 50 years (Matikinye, 2005). This phenomenon necessitated the need for an investigation to ascertain its cause in Zimbabwe. As a result, the research identifies and presents hyperinflation as the root cause of the crisis in Zimbabwe and illustrates the validity of this assertion with a focus on the Zimbabwean construction industry. As part of the research inquiry, a review of related literature was conducted. The literature review illustrated the generic effects of hyperinflation as well as the effects of this phenomenon in action in Zimbabwe. The literature study was followed by a questionnaire survey. The questionnaire was completed by 23 contractors and 7 clients from a census of contractors and clients in Zimbabwe. The questionnaire consisted of a number of variables, which the respondents were asked to rate vis-à-vis the effects of hyperinflation in the construction industry. In summary, the questionnaire sought to determine the causes of hyperinflation in Zimbabwe, its specific effects on the construction industry and how respondents thought the phenomenon could be mitigated so as to revive the Zimbabwean construction industry. The techniques of re-scaling, in conjunction with descriptive and inferential statistics, ranking and quadrant analysis were applied to the data. Results from these analyses revealed a high degree of agreement among respondents vis-à-vis the effects of hyperinflation on the Zimbabwean construction industry. The interpretation of the results further revealed that hyperinflation has undoubtedly led to the collapse of the Zimbabwean construction industry. In conclusion, the research, applying the interpretations of v the survey findings, prescribes a number of ways in which the Zimbabwean construction sector may be resurrected. Among the recommended prescriptions, there are a number of debatable issues that arise that the researcher proposes should be subject to future study.
- Full Text:
- Date Issued: 2010
- Authors: Moyo, Admire
- Date: 2010
- Subjects: Inflation (Finance) -- Zimbabwe , Zimbabwe -- Economic conditions , Construction industry -- Economic aspects -- Zimbabwe
- Language: English
- Type: Thesis , Masters , MA
- Identifier: vital:9687 , http://hdl.handle.net/10948/1197 , Inflation (Finance) -- Zimbabwe , Zimbabwe -- Economic conditions , Construction industry -- Economic aspects -- Zimbabwe
- Description: Less than two decades ago, Zimbabwe was a symbol for the rest of the world of what Africa could become (Dell, 2005). DiSilvio (2007) contends that independent Zimbabwe was an economic success on route to attaining status of the most “developed country” in Africa. Contrary to expectations, by 2003 the Zimbabwean economy was shrinking faster than any other economy in the world at 18 percent per year (Richardson, 2005). Reports indicate that the Zimbabwean economy is in crisis and has since been set back by more than 50 years (Matikinye, 2005). This phenomenon necessitated the need for an investigation to ascertain its cause in Zimbabwe. As a result, the research identifies and presents hyperinflation as the root cause of the crisis in Zimbabwe and illustrates the validity of this assertion with a focus on the Zimbabwean construction industry. As part of the research inquiry, a review of related literature was conducted. The literature review illustrated the generic effects of hyperinflation as well as the effects of this phenomenon in action in Zimbabwe. The literature study was followed by a questionnaire survey. The questionnaire was completed by 23 contractors and 7 clients from a census of contractors and clients in Zimbabwe. The questionnaire consisted of a number of variables, which the respondents were asked to rate vis-à-vis the effects of hyperinflation in the construction industry. In summary, the questionnaire sought to determine the causes of hyperinflation in Zimbabwe, its specific effects on the construction industry and how respondents thought the phenomenon could be mitigated so as to revive the Zimbabwean construction industry. The techniques of re-scaling, in conjunction with descriptive and inferential statistics, ranking and quadrant analysis were applied to the data. Results from these analyses revealed a high degree of agreement among respondents vis-à-vis the effects of hyperinflation on the Zimbabwean construction industry. The interpretation of the results further revealed that hyperinflation has undoubtedly led to the collapse of the Zimbabwean construction industry. In conclusion, the research, applying the interpretations of v the survey findings, prescribes a number of ways in which the Zimbabwean construction sector may be resurrected. Among the recommended prescriptions, there are a number of debatable issues that arise that the researcher proposes should be subject to future study.
- Full Text:
- Date Issued: 2010
A dynamic analysis of the influence of monetary policy on the general price level in Zimbabwe under periods of hyperinflation and dollarisation
- Authors: Kavila, William
- Date: 2015
- Subjects: Monetary policy -- Zimbabwe , Inflation (Finance) -- Zimbabwe , Inflation targeting -- Zimbabwe , Zimbabwe -- Economic conditions
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10948/3889 , vital:20473
- Description: This thesis analyses the influence of monetary policy on the general price level in Zimbabwe during periods of hyperinflation and dollarisation. The first part of the analysis covers the period January 2006 to July 2008 when the country experienced high inflation and ultimately hyperinflation. The second part covers the period 2009 to 2012, when the country adopted the multi-currency system and became fully dollarised. In terms of motivation, the study firstly sought to empirically examine the factors that led to hyperinflation in Zimbabwe, paying particular attention to the influence of monetary policy. Secondly, the thesis sought to determine the major factors that influenced price formation in a dollarised Zimbabwean economy; a completely new macro-economic environment. A significant development in this new macro-economic environment was the loss of monetary policy autonomy of the central bank, which also contributed to the relevance of the study. This thesis makes two contributions. The first contribution is the finding that hyperinflation in Zimbabwe was caused by expansionary monetary policy as a result of the activities of an unrestrained and unaccountable central bank. The second contribution was the empirical finding that in the fully dollarised economy inflation is largely determined by external factors. This implies that the domestic economy has no control over domestic inflation developments and as such, Zimbabwean authorities should formulate appropriate economic policies to respond to the impact of external shocks on domestic price formation when the need arises. The role of monetary policy in Zimbabwe’s hyperinflation episode is assessed using the Autoregressive Distributed Lag (ARDL) and the Error Correction Model (ECM) approaches with monthly data from January 2006 to July 2008. The impact of monetary policy on hyperinflation is captured by the coefficient of broad money supply and the interest rate. Results indicate that hyperinflation was caused by expansionary monetary policy, the exchange rate premium and inflation expectations for both the short and long term. Zimbabwe’s hyperinflation episode which peaked during the period 2007 to 2008 brings to the fore the importance of ensuring that the central bank is independent in executing its mandate of influencing the monetary policy process in a manner that ensures price stability. The ARDL and ECM approaches are also used to explore the dynamics of inflation in the dollarised Zimbabwean economy, with monthly data from January 2009 to December 2012. The main drivers of inflation under the multi-currency system were found to be the United States of America dollar/South African rand exchange rate, international oil prices, inflation expectations and the South African inflation rate. The findings contrast with the hyperinflationary era, where empirical studies have cited excessive money supply growth as the major driver of inflation dynamics in Zimbabwe. The results also suggest a higher exchange rate pass-through to domestic prices, consistent with empirical literature which postulates that inflation in dollarised economies is largely explained by movements in the exchange rate of major trading partners and international prices. The policy implication from the analysis is the need for policy makers to aggressively promote policies that ensure increased productivity of the economy. An improvement in productivity would influence the relative prices of tradable and non-tradable goods and ultimately the general price level in the economy. The study also quantified the independence of the Reserve Bank of Zimbabwe (RBZ) using the Mathew (2006), “new index for institutional quality” and the results showed that the RBZ is not an independent central bank. The central bank is found to have a low index of central bank independence (CBI), against a high level of inflation. While this relationship does not imply causality it can be inferred that the lack of independence of the RBZ could have influenced inflation dynamics in Zimbabwe. Only a subordinated central bank can be compelled to engage in inflationary deficit financing and also fund quasi-fiscal activities. The provisions of the RBZ Act [Chapter 22:15] in their current form make the central bank an appendage of the Ministry of Finance and Economic Development and this has, to a large extent, resulted in conflict between the political goals of government and the central bank’s primary objective of achieving price stability. In the event that Zimbabwe reintroduces its own currency in future, the achievement of the primary goal of price stability by the central bank will only be realised if the apex bank is given more autonomy.
- Full Text:
- Date Issued: 2015
- Authors: Kavila, William
- Date: 2015
- Subjects: Monetary policy -- Zimbabwe , Inflation (Finance) -- Zimbabwe , Inflation targeting -- Zimbabwe , Zimbabwe -- Economic conditions
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: http://hdl.handle.net/10948/3889 , vital:20473
- Description: This thesis analyses the influence of monetary policy on the general price level in Zimbabwe during periods of hyperinflation and dollarisation. The first part of the analysis covers the period January 2006 to July 2008 when the country experienced high inflation and ultimately hyperinflation. The second part covers the period 2009 to 2012, when the country adopted the multi-currency system and became fully dollarised. In terms of motivation, the study firstly sought to empirically examine the factors that led to hyperinflation in Zimbabwe, paying particular attention to the influence of monetary policy. Secondly, the thesis sought to determine the major factors that influenced price formation in a dollarised Zimbabwean economy; a completely new macro-economic environment. A significant development in this new macro-economic environment was the loss of monetary policy autonomy of the central bank, which also contributed to the relevance of the study. This thesis makes two contributions. The first contribution is the finding that hyperinflation in Zimbabwe was caused by expansionary monetary policy as a result of the activities of an unrestrained and unaccountable central bank. The second contribution was the empirical finding that in the fully dollarised economy inflation is largely determined by external factors. This implies that the domestic economy has no control over domestic inflation developments and as such, Zimbabwean authorities should formulate appropriate economic policies to respond to the impact of external shocks on domestic price formation when the need arises. The role of monetary policy in Zimbabwe’s hyperinflation episode is assessed using the Autoregressive Distributed Lag (ARDL) and the Error Correction Model (ECM) approaches with monthly data from January 2006 to July 2008. The impact of monetary policy on hyperinflation is captured by the coefficient of broad money supply and the interest rate. Results indicate that hyperinflation was caused by expansionary monetary policy, the exchange rate premium and inflation expectations for both the short and long term. Zimbabwe’s hyperinflation episode which peaked during the period 2007 to 2008 brings to the fore the importance of ensuring that the central bank is independent in executing its mandate of influencing the monetary policy process in a manner that ensures price stability. The ARDL and ECM approaches are also used to explore the dynamics of inflation in the dollarised Zimbabwean economy, with monthly data from January 2009 to December 2012. The main drivers of inflation under the multi-currency system were found to be the United States of America dollar/South African rand exchange rate, international oil prices, inflation expectations and the South African inflation rate. The findings contrast with the hyperinflationary era, where empirical studies have cited excessive money supply growth as the major driver of inflation dynamics in Zimbabwe. The results also suggest a higher exchange rate pass-through to domestic prices, consistent with empirical literature which postulates that inflation in dollarised economies is largely explained by movements in the exchange rate of major trading partners and international prices. The policy implication from the analysis is the need for policy makers to aggressively promote policies that ensure increased productivity of the economy. An improvement in productivity would influence the relative prices of tradable and non-tradable goods and ultimately the general price level in the economy. The study also quantified the independence of the Reserve Bank of Zimbabwe (RBZ) using the Mathew (2006), “new index for institutional quality” and the results showed that the RBZ is not an independent central bank. The central bank is found to have a low index of central bank independence (CBI), against a high level of inflation. While this relationship does not imply causality it can be inferred that the lack of independence of the RBZ could have influenced inflation dynamics in Zimbabwe. Only a subordinated central bank can be compelled to engage in inflationary deficit financing and also fund quasi-fiscal activities. The provisions of the RBZ Act [Chapter 22:15] in their current form make the central bank an appendage of the Ministry of Finance and Economic Development and this has, to a large extent, resulted in conflict between the political goals of government and the central bank’s primary objective of achieving price stability. In the event that Zimbabwe reintroduces its own currency in future, the achievement of the primary goal of price stability by the central bank will only be realised if the apex bank is given more autonomy.
- Full Text:
- Date Issued: 2015
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