...Assignment 1. The Case Study 01 article described Zimbabwe as experiencing “galloping hyperinflation “. According to your textbook, what is the definition of hyperinflation? |No |Author |Textbook |Definition | | | | | | |1. |Mishkin, Frederic S. |The Economics Of Money, Banking & Financial|Whenever a country’s inflation rate is extremely high | | | |Markets, ninth edition - Pearson |for a sustained period of time, its rate of money supply| | | | |growth is also extremely high. Indeed, this is exactly | | | | |which show that the countries with the highest inflation| | | | |rates have also had the highest rats of money growth. | | | | | | |2. |Ben S Bernanke |Inflation Targeting: Lessons from the |That high inflation is detrimental to the economy...
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...Dynamic Enquiry into the Causes of Hyperinflation in Zimbabwe Albert Makochekanwa University of Pretoria Working Paper: 2007-10 July 2007 __________________________________________________________ Department of Economics University of Pretoria 0002, Pretoria South Africa Tel: +27 12 420 2413 Fax: +27 12 362 5207 Title Author : A Dynamic Enquiry into the Causes of Hyperinflation in Zimbabwe : Albert Makochekanwa1 : Email: almac772002@yahoo.co.uk : Department of Economics, University of Pretoria, South Africa Affiliation Abstract The purpose of this study is to determine the causes of hyperinflation in Zimbabwe for the period February 1999 to December 2006 using appropriate econometric techniques. Results from long run and shot run econometric models shows money supply, black market for foreign exchange (US$) and lagged values of hyperinflation to be positively correlated with the country’s hyperinflation trend. This result accords well with the various theories of hyperinflation. Surprisingly, political rights index as a determinant is negatively associated with hyperinflation, suggesting that an increase in this variable reduces hyperinflation. This is against economic theory, which expects a positive sign for this, variable. Granger causality test is also conducted between money supply and hyperinflation to empirically test the direction of causality, while sensitivity tests are done to infer the effect of money supply shock on hyperinflation trend. 1 1.1 INTRODUCTION ...
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...stance in the inflation debate, caused by the catastrophic Weimar hyperinflation during the interwar period (1921-1924). Another case of hyperinflation and perhaps the most recent...
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...Zimbabwe is a country which suffers from mismanaged resources, hyperinflation and an extremely high unemployment rate, 94% in 2008 (Mangena, 2014). In the early 2000’s a land reform was initiated to redistribute land from the conventionally wealthy white nationals of Zimbabwe to the poorer black farmers who farmed for their own subsistence. However, a corrupt government repatriated that land towards its own members. This land became idle as the new owners became disinterested in maintaining their farms and export production fell, spiralling the country into poverty. During this time, Zimbabwe was also taking part in the Second Congo War which drained the country of its resources. By the end in 2003 Zimbabwe began to feel the pressures of hyperinflation. The government has been printing money in order to fuel its efforts in the war, allocating high salaries for army and government officials, which would not be unexpected as Zimbabwe is ranked 156/175 by Transparency International for its corruption (Transparency International, 2015). This tied in with “self-dealing” led to hyperinflation, its peak month of inflation in mid-November 2008 estimated at 79,600,000,000% (Hanke & Kwok, 2009). This would lead to Zimbabwe ditching its national currency in 2009 and adopting other countries’ currencies, and leaving its citizens poorer than ever. The country of Haiti was once a very prosperous French colony, which over the years has suffered from corruption, national disasters, and deforestation...
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... In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of monetary and price inflation, causing the population to minimize their holdings of money. Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value. Meanwhile, the real value of economic items generally stays the same with respect to one another, and remains relatively stable in terms of foreign currencies. This includes the economic items that generally constitute the government's expenses. There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless. Hyperinflation is often associated with wars, their aftermath, socio-political upheavals, or other crises that make it difficult for the government to tax the population, as a sudden and sharp decrease in tax revenue coupled with a strong effort to maintain the status quo can be a direct trigger of hyperinflation. When associated with depressions, hyperinflation often occurs when there is a large increase in the money supply not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money. Left unchecked this causes prices to increase, as the currency loses its value. When associated with wars, hyperinflation often occurs when there is a loss of confidence...
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...Without indispensable supportive reserves, The RBZ was forced to create money by its state and in such excess as to fuel a horrible hyperinflation was experienced. The state simultaneously enforced lots of functions and duties which were in conflict with the ones of the reserve bank, which included the buying and distribution of agricultural and farm implements, the buying of cars for politicians, judges and others as well as purchasing houses for judges and senior military personnel. The Reserve Bank of Zimbabwe was hence placed to a state of almost being insolvent, and was unable to manage money supply (but effectively was forced to increase such supply excessively, with commensurate economic prejudices).after the shocking experience the value of the Zimbabwean currency was destroyed as it was void and was devastated by the hyperinflation...
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...l in Zimbabwe Understanding the “new normal” in Zimbabwe The term ‘new normal’ is a term coined by Mohamed El-Erian, co-chief investment officer of Pimco, a California investment firm to refer to the situation the world found itself in after the Global Financial Crisis (GFC) of 2008-2010. From a global perspective, this phenomenon has led to mixed fortunes on the economies of different countries. Characteristic of the ‘new normal’ is the remarkable gaining of economic influence of the East due to the growing shift in global economic activity from West to East. Emerging Markets (Ems) proved to be a force to reckon with due to the increased flow of capital between the (Ems) themselves and to industrial countries as well as due to the increase in their stake or share in the global output from 40% in 1990 to 50% and expected to grow to 60% by 2035. The Global recession resulted in a deliberate greater government intervention in most countries to save respective banking systems from collapsing. As a result, there is a significant role to be played by governments in the economies of most countries which might have a negative impact of financial protectionism in some instances or lead to greater global financial coordination and transparency. In the ‘new normal’, the West has lost its ability to set the global agenda as seen in the transition from a G-7 to a Group of 20 which includes players in the Emerging Markets like Brazil, Russia, India, China, South Korea, Saudi Arabia...
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...ECON 11026 Assignment Item 1 . S0183732 Part A Q1ai) Article can be found in the following website : http://www.skynews.com.au/businessnews/article.aspx?id=738928&vId= The article ‘ Strong jobs figures put rate cut in doubt’ described that there is an increase in employment in the last one month which might help in putting hold to rate cut by Reserve Bank of Australia. There are positive signs in Australian job market with increase in 44000 employed people showing signs of recovery and better production levels. This will also increase private consumption giving rise to increased demand. Q1aii) This news article describes tradeoffs between interest rate cuts, inflation rate and unemployment rate. Q1aiii) First of all, this news article discusses the strong revival in the Australian job market seen in the month of March. More than 44000 jobs were created in the month of March across the nation which showed great signs of growth and production. It also says that unemployment rate is steady at the rate of 5.2 percent. The increase in number of jobs surpassed all the expectations of economists which estimated it to be 5000 in the month due to 15000 lost jobs in the month of February. Economists now estimate that due to strong job market and higher production levels, Reserve Bank of Australia (RBA) may undermine expected interest rate cuts. It had managed to keep cash rate at 4.25 percent but hinted at possible rate cuts in the month of...
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...Financial management report Submitted by : vaibhav goel(13117074) Shubham Gupta(13117066) Vipul arora(13117076) Shakti rana(13117064) DEFINITION of 'Inflation' Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly. BREAKING DOWN 'Inflation' As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a pack of gum that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls. Monetarism theorizes that inflation is related to the money supply of an economy. For example, following the Spanish conquest of the Aztec and Inca empires, massive amounts of gold and especially silver flowed into the Spanish and other European economies. Since the money supply had rapidly increased, prices spiked and the value of money fell, contributing to economic collapse What Causes Inflation? We can define inflation with relative ease, but the question of what causes inflation is significantly more complex. Although numerous theories exist, arguably the two most influential schools of thought on inflation are those of Keynesian and monetarist economics. ------------------------------------------------- ...
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...Why do we care about inflation? Unexpectedly high inflation transfers wealth thought in the 1960s: a little inflation is a good idea. A little inflation makes labor markets(the modern market economy) work better. People will accept lower real wages but they wouldn’t accept lower nominal wages. Helps the economy find the right real wages. Cost push Demand pull hyperinflation a result of bad economic policy e.g. Germany 1923 hyperinflation in Zimbabwe didn’t focus on the fiscal policy, just on the monetary. Zimbabwean currency became extinct. Govt spending is 97% of GDP. The quantity eqn. of money tells you what inflation should be. ECONOMIC FLUCTUATIONS P.T.O Chapter 11: Changes in Potential GDP and Real GDP causes econ. Fluctuations E.g. technological changes= higher productivity, higher production Sunspots : a random variable that does not directly affect economic fundamentals (such as endowments, preferences, or technology). K-waves: Averaging fifty and ranging from approximately forty to sixty years, the cycles consist of alternating periods between high sectoral growth and periods of relatively slow growth. Kondratiev identified three phases in the cycle: expansion, stagnation, recession. Most fluctuations come from changes in Aggregate demand NOT SUPPLY. Stability= point where spending equals production (equilibrium) * Suppose Government or Businesses increased their (constant) spending? what happens to real production? What...
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...National University of Ireland, Dublin Cross-Cultural Management An In-Depth Analysis of Zimbabwe Class: BSC15D Submitted by: 6th August 2011 Table of Contents | 1.0: Introduction ……........................................................................................................................... | 2.0: Findings………………......................................................................................................................2.1: Political Philosophy and Ideology …………………………………………………………………………2.2: Economic Philosophy and Ideology ……………………………………………………………………….2.3: Geographic Philosophy and Ideology……………………………………………………………………..2.4: History Philosophy and Ideology ………………………………………………………………………….2.5: Language Philosophy and Ideology ……………………………………………………………………….2.6: Religion Philosophy and Ideology …………………………………………………………………………2.7: Social Structure Philosophy and Ideology …………………………………………………………….. | 3.0: Analysis…………………………………………………….………………………………………………………………44.0: Implication........................................................................................................................4 | 5.0: Conclusion...............................................................................................................4 | 6.0: Referencing.................................................................................................................................5 | | | 1.0 Introduction 2.1 Political Philosophy and Ideology ...
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...HW 4 Solutions 2. a. Percentage change of exchange rate from 2009-2010: Canada=(0.9643-0.9225)/0.9225=4.53% Mexico=(0.0788-0.0756)/0.0756=4.23% China=(0.1473-0.1454)/0.1454=1.31% Japan=(0.0112-0.0105)/0.0105=6.67% b. Percentage change in the nominal effective exchange rate for the United States between 2009 and 2010: =(4.53%*36%)+(4.23%*28%)+(1.31%*20%)+(6.67%*16%)=(+)4.14% United States' effective exchange rate has depreciated by 4.14%. c. The value of U.S. dollar has depreciated by 4.14% against the basket. Compared with the change in the value of the U.S. dollar relative to the Mexican Peso, where U.S. dollar depreciated 4.23% against Peso, the 4.14% depreciation of the U.S. dollar against FX basket is smaller. The reason is that Mexico only take 28% of trade share of United States, there are also other trade partners whose currency also could affect the nominal exchange rate for U.S. For this question, U.S. dollar only depreciated 1.31% against Chinese yuan, which bring down the number of overall depreciation of U.S. dollar against foreign currency basket. 6. a. The investor's return on euro-denominated Dutch deposits is €1,000*(1+4.04%)=€1,040.4 b. Using forward cover, the euro-denominated return on British deposits is €1,000*(1.575/1.5)*(1+2%)=€1,071 c. Yes, there is an arbitrage opportunity because the euro-dominated return on British deposits is higher than that on Dutch deposits. The net return...
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...look at how Zimbabwe Electricity Supply Authority (ZESA) evolved since 2000. It will also look at the strategic nightmares encountered, which led to making certain decisions and initiatives. It will analyse some of the strategies adopted and how they fit in line with the operating environment. The paper will look at background of ZESA, the general operating environment, the strategic choice taken and proffer possible advice which is not a panacea but offers pointers on how to lead change in a turbulent environment. In 1991, the Government of Zimbabwe adopted a public enterprise reform strategy as part of a World Bank driven Economic Structural Adjustment Programme (ESAP). For the electricity sector, the Government adopted a two-pronged programme of reform a performance improvement programme (PIP) for the national utility, the Zimbabwe Electricity Supply Authority (ZESA), and a legal and regulatory reform programme for the electricity sector in general. Ten years later, significant success has been achieved in improving the utility’s performance in technical operations and customer service. However, there has been very little progress on the legal and regulatory front. This has adversely affected the utility’s financial performance, as well as frustrating the Government’s efforts in attracting private sector investment. The Zimbabwe Electricity Supply Authority (ZESA) provides the bulk of electricity generated, transmitted, distributed and supplied in Zimbabwe. It is a statutory...
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...Question In 1992 interest rates in Zimbabwe rose to an all time high. To what extent and in what ways are company financial policies and investment plans likely to be affected by the high interest rates Answer According to Thomas E Stitzel interest rates are the prices of credit,the cost of money,the earning rate on financial assets.It can also be defined as a fee paid on borrowed capital. Generally speaking, a higher real interest rate reduces the broad money supply. The "real interest rate" is the nominal interest rate minus the inflation rate. Zimbabwe continues to have negative real interest rates. These rates discourage investment and production but aid undesirable levels of speculation and in turn aid and abet inflation.For example in 1992 because of high interest rates companies like the GMB could not be able to supply maize in such a way that we had donors from USA donating yellow maize(Kenya). Gearing is fundamental analysis ratio of a company's level of long-term debt compared to its equity capital. Gearing is expressed is percentage form. If you have taken out a loan to fund your investments, such as a margin loan to invest in managed funds or a mortgage to buy direct property, increases in interest rates will increase your loan repayments Interest rates have an effect on consumer and business confidence. A rise in interest rates reduces the net return to investment thereby discouraging investment; it makes firms and consumers less willing to take out risky...
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... IA Zimbabwe, Factor 7: Animal Agriculture Zimbabwe: Overcoming Hunger Through the Improvement of Agricultural Education and the Issue Over Social Inequality What is hunger? Many would probably say it is that mildly uncomfortable feeling that you get after not eating for a few hours. The majority of people use the phrase “I’m starving!” when they get this feeling. But what about the 805 million people in which “starving” means not knowing where their next meal is coming from. Agriculturalists and world food leaders now face a huge challenge: in feeding the 9 billion people who are projected to be on Earth by 2050 (Nat’l Geographic). Of the 196 sovereign countries in the world, 147 are considered underdeveloped and lack food security, Zimbabwe being one of them. Zimbabwe is located in the southern portion of Africa, surrounded by Botswana, South Africa, Zambia, and Mozambique, making it a land-locked state. Zimbabwe has a total land area of 390,757 square miles and is home to 13,771,721 people (CIA World Factbook). The land is composed of mostly high plateaus with mountains in the east. With a tropical climate, the country has rainy seasons between November and March but is currently suffering from an extensive drought due to unreliable rainfall. The frequent droughts that occur throughout the year make it especially hard for farmers, ranchers, and families who depend on sustainable agriculture as their main source of income. Despite the fact that Zimbabwe has the...
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