IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/32703.html
   My bibliography  Save this paper

Evolution of Zimbabwe’s economic tragedy: a chronological review of macroeconomic policies and transition to the economic crisis

Author

Listed:
  • Ndlela, Thandinkosi

Abstract

This paper chronicles Zimbabwe’s macroeconomic policies and economic development trends from the post independence period up to end of 2006. By focussing on monetary and exchange rate policies and their influence on economic developments before and after the reform programme in 1991, the paper attempts to reveal the critical macroeconomic policy underpinnings of Zimbabwe’s post-2000 economic tragedy. A key insight from the review is that despite what seemed to be concerted economic management efforts, the authorities actually never succeeded in attaining sustainable economic stabilization goals from the very start of the post-independence era. The constraints imposed by the inward looking policies of the 1980s and the eventual failure of ‘free market’ exchange rate policies of the early 1990s resulted in chronic real exchange rate overvaluation and depletion of foreign exchange reserves. This eventually culminated in the so-called “Black Friday” currency crash, and a severe foreign exchange crisis that has since been viewed as one of the most important factors that led to the economic tragedy. Hence in retrospect, the review concludes that the post-independence government in Zimbabwe never succeeded in bringing the economy into long term structural equilibrium and, thus failed to create an enabling environment for medium to long term macroeconomic policy sustainability.

Suggested Citation

  • Ndlela, Thandinkosi, 2011. "Evolution of Zimbabwe’s economic tragedy: a chronological review of macroeconomic policies and transition to the economic crisis," MPRA Paper 32703, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:32703
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/32703/1/MPRA_paper_32703.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Huizinga, Harry, 1997. "Real exchange rate misalignment and redistribution," European Economic Review, Elsevier, vol. 41(2), pages 259-277, February.
    2. Edwards, Sebastian, 1989. "Exchange Controls, Devaluations, and Real Exchange Rates: The Latin American Experience," Economic Development and Cultural Change, University of Chicago Press, vol. 37(3), pages 457-494, April.
    3. Goderis, Benedikt & Ioannidou, Vasso P., 2008. "Do high interest rates defend currencies during speculative attacks New evidence," Journal of International Economics, Elsevier, vol. 74(1), pages 158-169, January.
    4. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
    5. Ndlela, Daniel & Robinson, Peter, 2007. "Distortions to Agricultural Incentives in Zimbabwe," Agricultural Distortions Working Paper Series 48515, World Bank.
    6. Agenor, P.R., 1992. "Parallel Currency Markets in Developing Countries : Theory, Evidence, and Policy Implications," Princeton Studies in International Economics 188, International Economics Section, Departement of Economics Princeton University,.
    7. Sebastian Edwards, 1989. "Tariffs, Capital Controls, and Equilibrium Real Exchange Rates," Canadian Journal of Economics, Canadian Economics Association, vol. 22(1), pages 79-92, February.
    8. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    9. Sebastian Edwards, 1989. "Real Exchange Rates in the Developing Countries: Concepts and Measure- ment," NBER Working Papers 2950, National Bureau of Economic Research, Inc.
    10. David Backus & John Driffill, 1985. "Rational Expectations and Policy Credibility Following a Change in Regime," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(2), pages 211-221.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael Takudzwa Pasara & Nigel Nyajeka & Steven Henry Dunga, 2023. "Enhancing Foreign Currency Allocation for Private Sector Development – Case of the Reserve Bank of Zimbabwe Forex Auction System," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 11(2), pages 72-89.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frankel, Jeffrey & Saravelos, George, 2012. "Can leading indicators assess country vulnerability? Evidence from the 2008–09 global financial crisis," Journal of International Economics, Elsevier, vol. 87(2), pages 216-231.
    2. U. Michael Bergman & Shakill Hassan, 2008. "Currency Crises and Monetary Policy in an Economy with Credit Constraints: The No Interest Parity Case," EPRU Working Paper Series 08-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    3. Goderis, Benedikt & Ioannidou, Vasso P., 2008. "Do high interest rates defend currencies during speculative attacks New evidence," Journal of International Economics, Elsevier, vol. 74(1), pages 158-169, January.
    4. Sylvester C. W. Eijffinger & Benedikt Goderis, 2008. "The Effect of Monetary Policy on Exchange Rates during Currency Crises: the Role of Debt, Institutions, and Financial Openness," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 559-575, August.
    5. Ndlela, Thandinkosi, 2010. "Implications of real exchange rate misalignment in developing countries: theory, empirical evidence and application to growth performance in Zimbabwe," MPRA Paper 32710, University Library of Munich, Germany.
    6. Bouoiyour, jamal & Kuikeu, Oscar, 2007. "Pertinence de la dévaluation du Franc CFA de janvier 1994 : Une évaluation par le taux de change réel d’équilibre. Cas de l’économie camerounaise [Relevance of the CFA France devaluation in January," MPRA Paper 31357, University Library of Munich, Germany.
    7. Emmanuel Owusu-Sekyere & Reneé van Eyden & Francis M Kemegue, 2014. "Remittances and the Dutch Disease in Sub-Saharan Africa: A Dynamic Panel Approach," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 8(3), September.
    8. Caporale, Guglielmo Maria & Cipollini, Andrea & Demetriades, Panicos O., 2005. "Monetary policy and the exchange rate during the Asian crisis: identification through heteroscedasticity," Journal of International Money and Finance, Elsevier, vol. 24(1), pages 39-53, February.
    9. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    10. Kuikeu, Oscar, 2011. "Comment la dernière crise financière a relancé le débat relatif à l'arrimage du fcfa à l'euro [How the recent financial crisis have revived the debate on the parity between fcfa and euro]," MPRA Paper 32077, University Library of Munich, Germany.
    11. Henry, Peter B. & Lorentzen, Peter Lombard, 2003. "Domestic Capital Market Reform and Access to Global Finance: Making Markets Work," Research Papers 1820, Stanford University, Graduate School of Business.
    12. Shinji Takagi, 2010. "Applying the Lessons of Asia: The IMF’s Crisis Management Strategy in 2008," Working Papers id:3006, eSocialSciences.
    13. Mardi Dungey & Rene Fry & Vance L. Martin, 2006. "Correlation, Contagion, and Asian Evidence," Asian Economic Papers, MIT Press, vol. 5(2), pages 32-72, Spring/Su.
    14. Paola Bongini & Stijn Claessens & Giovanni Ferri, 2001. "The Political Economy of Distress in East Asian Financial Institutions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 19(1), pages 5-25, February.
    15. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Rating the Rating Agencies," MPRA Paper 24578, University Library of Munich, Germany.
    16. Kuper, Gerard H. & Lestano, 2007. "Dynamic conditional correlation analysis of financial market interdependence: An application to Thailand and Indonesia," Journal of Asian Economics, Elsevier, vol. 18(4), pages 670-684, August.
    17. Justin Yifu Lin, 2010. "Shocks, Crises, and Their Determinants," Middle East Development Journal, Taylor & Francis Journals, vol. 2(2), pages 159-176, January.
    18. Ffrench-Davis, Ricardo, 2003. "Financial crisis and national policy issues: an overview," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1785.
    19. Bleakley, Hoyt & Cowan, Kevin, 2010. "Maturity mismatch and financial crises: Evidence from emerging market corporations," Journal of Development Economics, Elsevier, vol. 93(2), pages 189-205, November.
    20. Spiros Bougheas & Hosung Lim & Simona Mateut & Paul Mizen & Cihan Yalcin, 2018. "Foreign currency borrowing, exports and firm performance: evidence from a currency crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 24(17), pages 1649-1671, November.

    More about this item

    Keywords

    Zimbabwe; exchange rate misalignment; macroeconomic policy; economic crisis;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:32703. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.