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

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  • Miller, Stephen Matteo
  • Ndhlela, Thandinkosi

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.

Suggested Citation

  • Miller, Stephen Matteo & Ndhlela, Thandinkosi, 2020. "Money demand and seignorage maximization before the end of the Zimbabwean dollar," Journal of Macroeconomics, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:jmacro:v:63:y:2020:i:c:s0164070419300539
    DOI: 10.1016/j.jmacro.2019.103186
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    More about this item

    Keywords

    Cagan's Paradox; Hyperinflation; Money demand; Seignorage maximization; Bayesian time varying parameter structural vector autoregressions;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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