2008 Student Research Conference:
21st Annual Student Research Conference

Zimbabwe's Hyperinflation, Purchasing Power Parity, and the Balance of Payments
Daniel W. Campbell
Dr. Xiaofen Chen, Faculty Mentor

The latest figures from the Reserve Bank of Zimbabwe reveal official inflation rates over 24,000%, up from 1700% just a year ago, and independent estimates remain many times higher. This paper examines the monetary results of such astronomical inflation. By examining relative purchasing power parity, we find an appreciation of the real exchange rate. In effect, Zimbabwe has become less competitive in international markets, skewing both their current and financial accounts. Zimbabwean officials also significantly overvalue their currency, leading to less competitiveness in international markets. Zimbabwe must then finance the trade deficits through borrowing, taxing, or monetizing the debt. From a monetary standpoint, then, hyperinflation not only devastates the economy, but it is also amplified by a deteriorating balance of payments.

Keywords: Zimbabwe, Hyperinflation, Inflation, Monetary Policy, International Economics

Topic(s):Economics

Presentation Type: Oral Paper

Session: 46-2
Location: VH 1232
Time: 3:00

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