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Copper Boom and Bust in Zambia: The Commodity-Currency Link

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  • Elva Bova

Abstract

Using Zambia as a case study, this article presents some of the challenges that small resource-dependent economies faced during the commodity boom and the financial crisis. In particular, we investigate the implications of having a price stability mandate when the scope for countercyclical fiscal policy is constrained by limited resource revenues accruing to the budget. We show that, in Zambia, the inflation-focused monetary framework exacerbated the effects of the shocks. The framework worked in favour of currency appreciation during the copper boom, and it did not allow the accumulation of international reserves, which could have been used to respond to the currency depreciation caused by the copper bust.

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  • Elva Bova, 2012. "Copper Boom and Bust in Zambia: The Commodity-Currency Link," Journal of Development Studies, Taylor & Francis Journals, vol. 48(6), pages 768-782, June.
    • Handle: RePEc:taf:jdevst:v:48:y:2012:i:6:p:768-782
    DOI: 10.1080/00220388.2011.649258
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    1. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
    2. World Bank, 2008. "Republic of Yemen Country Water Resources Assistance Strategy," World Bank Publications - Reports 11756, The World Bank Group.
    3. Fynn, John & Haggblade, Steven, 2006. "Potential Impact of the Kwacha Appreciation on Zambia Agriculture," Food Security Collaborative Policy Briefs 54617, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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    Cited by:

    1. Su, Chi-Wei & Wang, Xiao-Qing & Zhu, Haotian & Tao, Ran & Moldovan, Nicoleta-Claudia & Lobonţ, Oana-Ramona, 2020. "Testing for multiple bubbles in the copper price: Periodically collapsing behavior," Resources Policy, Elsevier, vol. 65(C).
    2. Kragelund, Peter, 2017. "The making of local content policies in Zambia's copper sector: Institutional impediments to resource-led development," Resources Policy, Elsevier, vol. 51(C), pages 57-66.

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