Essays on What Features of Zimbabwes Economy Provides a View of the Cost of Hyperinflation Assignment

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The paper "What Features of Zimbabwe’ s Economy Provides a View of the Cost of Hyperinflation" is an outstanding example of a macro & microeconomics assignment. Inflation is the percentage change in the price index while money growth is the percentage change in the money supply. The following table and graph show the respective levels of inflation and money growth in Zimbabwe between 1998 and 2007. Year GDP Growth (%) Inflation Change Money Growth Change 1998 -0.8 47 26 1999 -2.1 57 39 2000 -7 55 53 2001 -3 112 144 2002 -4 199 171 2003 -10 599 491 2004 -2 133 234 2005 -4 586 547 2006 -3 1281 1315 2007 -6 7982 66659 Table 1: Macroeconomic Trends in Zimbabwe 1998 – 2007 (AFP, 2008) As shown in the table above, Zimbabwe’ s inflation increased from around 47% in 2000 to 7982% in a span of just 10 years.

Thereafter, the inflation kept increasing to reach 231,150,889 % in 2008 when the country disbanded the national currency and adopted various foreign currencies as legal tenders (Doug et al, 2010). Since the year 2000, Zimbabwe experienced annual inflation rates of more than 100%. In 2006, the country’ s inflation rate rose to more than 1500% annually. Currently, Zimbabwe is the only country with a hyper-inflated economy and is the worst case of inflation to be recorded in the 21st century.

Zimbabwe’ s money growth rate was less than 50% in 2000 (AFP, 2008). In 2001, the growth rate of money showed a higher rate of increase than the inflation rate and maintained steady growth in inflation in the subsequent years before reaching 66700 in 2007. The country’ s inflation and money growth paths started to diverge in late 2003 (Doug et al, 2010). Annual inflation soared from less than 47% in 1998 to a peak of 625% at the beginning of 2004 but decelerated in March 2004. In contrast, broad money growth started to decelerate in July 2004 from 400% in December 2003 to 130% in July 2004 (AFP, 2008).

This was in contrast to the experience under stabilization efforts in the majority of countries where inflationary inertia has been witnessed.  

Reference

AFP. (2008). Reading between the lines: Zimbabwe unveils 50million Dollar Note. 12 December, Agencies France Press.

Doug, M., Christopher, F. & Michael, P. (2010). Economics. Sydney: Pearson Education Australia.

Sònia, M. (2006). Washington: Suppressed Inflation and Money Demand in Zimbabwe, Issues 6-15. International Monetary Fund

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