Abstract
Does dollarisation influence economic activity in Zimbabwe? The question has incited a lot of debates among researchers and analysts. In an attempt to answer this question, the study used an Auto Regressive Distributive Lag (ARDL) procedure, to investigate the effects of dollarisation on economic growth in Zimbabwe. The study employed quarterly data over a 14-year period between 2000 and 2014. The results of the study indicate that dollarisation, gross domestic investment and trade openness are positively related to economic growth. Based on the findings of the study, the paper recommends that Zimbabwean policy makers should establish additional complementary policies which foster economic integration with anchor countries to reduce credit risk. On the other hand, dollarisation should be maintained since it resulted in economic stability and improved financial sector credibility. It is therefore still premature to de-dollarise the economy until a sufficient level of credibility is gained by the central bank.
Highlights
The Zimbabwean economy has been characterised by several monetary and fiscal challenges, hyperinflation, liquidity constraints, deindustrialisation and high interest rates (Mpofu 2015; Sikwila2013)
This is in agreement with the argument raised by Anderson (2016) and Mpofu (2015) who purported that dollarisation leads to real convergence in terms of GDPP levels and convergence of business cycles with the issuing country and that shocks become more synchronized, further fostering integration
This study investigated whether dollarisation achieved its purpose by investigating its impact on economic growth from 2000 to 2015
Summary
The Zimbabwean economy has been characterised by several monetary and fiscal challenges, hyperinflation, liquidity constraints, deindustrialisation and high interest rates The monetary authorities introduced a multicurrency regime in an attempt to solve the aforementioned economic challenges (Reserve Bank of Zimbabwe (RBZ) 2016). The term ‘dollarisation’ became commonly used to refer to Zimbabwe’s multicurrency regime for two reasons. The term dollarisation became commonly used to refer to the multicurrency regime because more than. An economic rebound was felt between 2009 and 2012 before the economy started to subside again (African Development Bank (AfDB) 2014). Thereafter, macroeconomic variables variables either stagnated or declined. Analysts have attributed the economic stagnation to dollarisation. 1 below gives aofpicture of have attributed the economic stagnation to dollarisation. Below gives a picture how the how the economy boomeranged in 2012 after dollarisation.
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