Hyperinflationary Environment Research Articles

Strategic orientation of internal corporate financing in a hyperinflationary environment

El objetivo fue describir la orientación estratégica del financiamiento interno empresarial en el entorno hiperinflacionario, considerando el contexto del sector autopartes de Tinaquillo, estado Cojedes- Venezuela al 2021. Se efectuó un estudio cuantitativo, de campo, no experimental y descriptivo, con recojo de datos por cuestionario, aplicado a una muestra/población de tres (3) gerentes financieros del sector autopartes de Tinaquillo, estado Cojedes. Se concluye, que el sector empresarial de autopartes ha sobrevivido al entorno hiperinflacionario, a través del enfoque hacia las ganancias liquidas, ajuste permanente de precios, democratizando los procesos de generación de ganancias y negociación laboral; ello aunado a la búsqueda de la eficiencia del capital de trabajo, ajuste permanente de precios, alternativas para el uso del capital y acuerdos ganar-ganar con el talento humano.

Linkage between rewards and workspace morale in a hyperinflationary environment

The study presents a burden on theory and practice for discovering a reward criterion that achieves workspace morale in a hyperinflationary context. It aimed to determine the relationship between the individual components of rewards (extrinsic, intrinsic, and social) and workspace morale and the mediating role of employee engagement in a hyperinflationary context. The study applied a cross-sectional study. It employed a structured questionnaire as a study instrument. The target population for the study comprised 900 employees and managers of Bindura municipality in Zimbabwe. The study employed a sample of 269 employees and managers, and the methodology used was a case study. A total of 269 questionnaires were hand delivered after administering the ethical consent form. A total of 214 questionnaires were returned, and after preliminary review and cleaning, 17 questionnaires were found with missing values leaving 197 analyzable questionnaires thus, achieving a 73.2% response rate. The study used multiple regression analysis. The results reveal a significant direct effect of total reward, intrinsic reward, and social reward on workspace morale. The direct effect of extrinsic reward on workspace morale was statistically insignificant. It also reveals that the effects of total reward on workspace morale are mediated only partially by employee engagement. The study viewed employee engagement as a mediating force between rewards and workspace morale but did not examine the bond longitudinally. The study recommends exploring reward options, specifically supportive supervisory relations, work autonomy, role clarity, skill variety and regular feedback to improve workspace morale in hyperinflation. The results demonstrate the importance of practices that win employee hearts to enhance commitment instead of external motivation in an inflationary environment.

A New Dimension in the World Economy - Fiat Digital Currencies: A Review

In an international economic situation in a hyperinflationary environment, the competition for international digital currencies is becoming increasingly intense. The Federal Reserve released its first study on the US central bank's digital currency in early 2022 and China's digital RMB pilot has expanded to 23 regions in 15 provinces and cities... In today's highly digitalized world, the development of a legal digital currency will have a profound impact on national monetary systems, the development of international standards for central bank digital currencies and even the global monetary landscape and is worthy of focused attention and in-depth study. This paper summarizes the development and application of legal digital currency and its limitations at the present stage by combing and analyzing the legal digital currency research literature from CNKI, with a view to providing reference for legal digital currency to better support the innovative development of digital economy, finding a new direction for better development of digital currency and providing a prospect for the internationalization of legal digital currency.

The impact of inflation on the presentation of financial statements by Syrian companies

Subject. This article examines the economic essence of inflation, its impact on the activities of companies in the Syrian Arab Republic, the indicators of financial reporting and the adjustment of its data taking into account hyperinflation on the basis of the provisions of IAS 29. Objectives. The article aims to study the effects of inflation on the Syrian economy, identify and solve the problems of forming financial reporting in the conditions of constantly rising prices and reducing the purchasing power of the monetary unit as a result of hyperinflation. Methods. For the study, we used the methods of observation, comparison, generalization, and interpretation. Results. The article describes the impact of inflation on the economic activities of Syrian companies. It shows that in a hyperinflationary environment, financial reporting based on historical value is unreliable, misleading to users, and causes difficulties in making management decisions. Conclusions and Relevance. The article confirms the hypothesis about the positive impact of the adoption of IAS 29 on the formation of financial reporting and on the analysis of its indicators in the event of hyperinflation. The significance of the study lies in the substantiation of the position that the ongoing negative changes in economic conditions caused by hyperinflation require adjustments to the indicators of reporting compiled on the basis of historical data.

Job performance: Working conditions of urban teachers in Zimbabwean schools

Orientation: For Zimbabwean schools to deliver quality education in this competitive and hyperinflationary environment, teachers must be paid a living wage, which is commensurate with their noble profession to spruce up their public image and retain the best. Research purpose: The research established the Zimbabwean urban teachers’ working conditions, which affected their job performance and proffered remedies. Motivation for the study: Schools with favourable working conditions attracted, developed and retained highly qualified, experienced and effective teachers. The opposite resulted in low productivity, high turnover, absenteeism, moonlighting, job hopping and attrition. Research approach/design and method: A qualitative approach informed by a constructivist grounded theory was used. Sixteen experienced teachers and four education managers had their lived experiences on the phenomenon under investigation interrogated as experienced in Bulawayo Metropolitan Province (BMP). Main findings: The findings suggested that the improvement of the teachers’ working conditions enhanced their job performance. Teachers bemoaned the low remunerations that could not meet their basic physiological needs, which were fundamental in enhancing their job performance. They also claimed that the teacher to learner ratio and curriculum demands overworked them amid the scarcity of resources. Sponsored career development opportunities were unavailable. Practical/managerial implications: Improving the working conditions of teachers would not only enhance their job performance but also reduce high turnover, attrition rate and moonlighting, which has become a malaise in Zimbabwean schools. Contributions/value-add: The study revealed that improving the remuneration for teachers has a domino effect on their poor working conditions.

Price controls, hyperinflation, and the inflation–relative price variability relationship

Chile established between 1970 and 1973 a fixed price policy for many products that was eliminated at the end of 1973 following a military coup. We use these pricing policies and their subsequent removal to determine how inflation affects relative price variability under contrasting price regimes and a hyperinflationary environment. We do so using unique monthly data for 23 food products between January 1970 and May 1982. We construct different relative price variability measures and consistently find that the sensitivity of relative price variability to inflation is larger when there is price-fixing.

The Effects of Exchange Rates Fluctuations on the Performance of a Manufacturing Concern in a Hyperinflationary Environment: A Case of Delta Beverages Zimbabwe

This study analyzes effects of exchange rate fluctuations on the performance of manufacturing firms using Delta beverages Zimbabwe as a case study. Delta was preferred as it imports some of its raw materials and capital goods from other countries. A case study was used because it allowed the researchers to concentrate on a real scenario, thus proffering solutions to any business that may want to use the stated findings for improving a real situation. The aims of the study were to assess the effect of exchange rates fluctuations on raw material availability, to assess the relationship between exchange rates and firm performance. The study used mixed research method allowing researchers to use both primary data and secondary data. Primary data was obtained using questionnaires and secondary data was obtained from Delta’s financial statements for 2017 and 2018. Results showed that that production output of Delta decreases as the currency depreciate, currency appreciation increases the production output of Delta beverages. Currency depreciation increases labor costs and leads to a fall in productivity of Delta beverages and currency appreciation reduces labor which supports the view that currency depreciation reduces the importation of machinery and equipment which will in turn slow productivity. It was found out that fluctuations of exchange rates in Zimbabwe have a significant effect on the availability of imported raw materials.

Hyperinflation and Its Impact on the Retail Sector in Zimbabwe

This study explores the impact of hyperinflation on the performance of OK supermarkets and the retail sector in Zimbabwe. This study used a mixture of research methods combining the qualitative and the quantitative approaches, although with a major leaning on the qualitative methodology. The major challenges bedeviling the retail supermarkets in Zimbabwe are inextricably linked to the hyperinflation which is the result of economic instability caused by sanctions, corruption and a host of other governance related factors. The hyperinflation in Zimbabwe contributes significantly to the poor performance of OK supermarkets and broadly the retail sector and other sectors of the economy. This study argues that OK Zimbabwe and others in the retail sector adopted survival strategies during the hyper-inflationary environment in Zimbabwe. Faced with increased competition, hostile economic market conditions, many retail grocery supermarkets and shops in Zimbabwe are devising ways to improving their performance against the backdrop of adverse economic conditions. To be competitive, some business administration and management scholars as well as policymakers have advocated for more innovative ways in keeping the businesses afloat. The survival and profitability of Zimbabwean businesses remains glaringly volatile considering the little support they are getting from the government. It also emerged from this study that the Zimbabwe business sector together with the government have implemented various strategies that contributed monumentally in mitigating the impact of hyperinflation in Zimbabwe. The study concludes by recommending dialogue between Zimbabwe and the West for the unconditional removal of sanctions owing to their debilitating impact on the economy and being the evil instigator of the prior and current hyperinflationary environments. There is need for robust policies that will help not only to arrest inflation but to resuscitate the comatose Zimbabwean economy.

The importance of tolerance for failure and risk-taking among insurance firms in hyperinflationary Zimbabwe

Background: At the dawn of the 21st century, Zimbabwe started moving towards dangerous levels of the infamous hyperinflation trajectory that made management of businesses a nightmare. Many businesses failed. Aim: This study seeks to explore if entrepreneurship, and in particular the aspects of risk-taking and tolerance of failure, could have saved the few companies that survived the menace that ravaged the insurance industries among many other sectors of the economy. Setting: The study looks at this particular entrepreneurial behaviour of risk-taking among insurance companies in Zimbabwe during the hyperinflationary environment that ravaged and defied economic logic and fundamentals. Savings were being eroded at a pace faster than anywhere in the world ever before, taking a toll on businesses as they struggled to survive. Methods: Using a survey sample of insurance companies in Zimbabwe, a quantitative approach was adopted. Questionnaires were used to extract data from participants to establish the nature and extent of risk-taking, and in particular tolerance for failure during this period. Therefore, tolerance of failure in corporate entities is discussed in this article as a critical aspect of risk-taking that enhances entrepreneurial innovation and ultimate prospects of corporate prosperity among insurance companies. A measure is developed to gauge the extent of tolerance of failure from the perspective of employees in the insurance industry in Zimbabwe. Results: The benefit of tolerance of failure or the lack thereof was measured on the dimension of profitability and growth. Results revealed that tolerance of failure is a necessary entrepreneurial virtue that encourages knowledge acquisition by both experimental and experiential learning – a risk element that also spurs entrepreneurial innovation and ultimately encourages both profitability and growth of the business entity, if well managed. Conclusion: The study concluded that firms that tolerate failure are more likely to be entrepreneurially innovative and perform better than those that are risk-averse and do not tolerate failure.

Developing Actuarial Assumptions within the Framework of a Hyper-Inflationary Environment

<div><p><em>The primary objective of this research is to determine the impact of actuarial assumptions for work liability valuations in Venezuela. The time frame of interest to the study finds that Venezuela has and continues to experience an extremely volatile rate of inflation. In such an environment, it is imperative that the discount rate be set as a function of the inflation rate plus a premium. This study is focused on the challenges of adopting such a policy given the absence of a well-developed capital market.</em></p></div>

Livelihood resilience in a hyperinflationary environment: experiences of people engaging in money-burning (kubhena mari) transactions in Harare, Zimbabwe

At the zenith of Zimbabwe’s protracted politico-economic crises around 2007, which resulted in record hyperinflation, the majority of ordinary people confronted monumental livelihood challenges and complex reconfigurations of social and economic relationships. Many people could hardly sustain themselves from their meagre salaries from formal employment. In spite of this seemingly insurmountable livelihood catastrophe, people did not remain passive victims of such economic quandary. Rather, in the midst of this economic crisis, many people demonstrated great ingenuity, resilience and displayed immense resourcefulness in terms of rationally navigating through the economic crisis. This study explores a widespread survival strategy adopted by many people in Harare as a response to economic conditions: that of “money burning” or illegally exchanging money on the black market through electronic transfers. It is argued in this study that the emergence of money “burning” was a clear manifestation of human agency directed at individual survival amid livelihood catastrophe. Research findings revealed that money burning had become the lifeblood of many urbanites’ survival and livelihood portfolio. Interestingly, people’s perceptions on the money-burning practice were rather ambivalent. In trying to dissect the money-burning practice, I adopted Giddens’s structuration thesis and more especially the “structure–agency” dichotomy as my analytical insight, showing how the structure constrains and enables simultaneously.

Household Food Insecurity and Survival in Harare: 2008 and Beyond

In 2008, Zimbabwe was in crisis, with an economy in ruins and a volatile political environment. The country’s GDP had contracted by over 40 % since 2,000 level; the official unemployment rate was over 80 %; hyperinflation was running at over 200 million percent; and food production deficits of the staple crop, maize, hovered around 1,000,000 tons. Within this hyperinflationary environment, food shortages were acute, and over 80 % of households in the country survived on less than US$2 per day. While this deleterious environment affected the whole country, the vulnerability of the urban poor to the economic meltdown and food insecurity was especially severe given their heavy reliance on food purchases and increases in other urban expenses such as rent, electricity, and transport. This paper assesses the vulnerability of poor households to food insecurity in Zimbabwe’s capital, Harare, under the crisis conditions and beyond. It argues that while the ushering in of the Government of National Unity in 2009 stabilized the political and economic situation by bringing down inflation, introducing a multi-currency regime, and improving the food supply, the general livelihoods of the poor did not drastically improve. The food security challenges facing poor urban households in Harare did not immediately improve for reasons that are discussed in the paper. The analysis is based on a comparison of data from two household surveys conducted in Harare, the first at the height of the crisis in 2008 and the second in 2012.

English

The paper investigated liquidity management by commercial banks when there was hyperinflation. The main enquiry of this study was to understand how Zimbabwe commercial banks managed liquidity risk in a hyperinflationary environment. To achieve this, information was obtained from primary sources with data collected from decision makers of fifteen commercial banks which met the criteria of full scale operation from 2000 -2009. To compliment this, secondary data sources were used. Focal areas of the study were to analyse years of bank business; ownership; liquidity risk management responsibility; products offered by commercial banks; major sources of funds and applications; internal and external liquid instruments to manage liquidity risk, impact of inflation on liquidity risk management; and the effect the Reserve Bank of Zimbabwe instruments introduced to fight inflation. The findings show that liquidity risk management during the hyperinflation was a challenge. The Instruments used by the Reserve Bank of Zimbabwe to fight inflation had negative effect on commercial banks asset and liability management. In line with this, the monetary authorities were recommended to put in place measures which took into consideration the impact of their policies on bank liquidity risk management when there are problems of high inflation. The study also recommends commercial banks to take proactive management measures and long term views to operations, in other words beyond the current challenges posed by inflation. In the process banks would create new demand for the products. Key words: Commercial banks, liquidity management, assets, liabilities, hyperinflation, Reserve Bank of Zimbabwe.

Impacts of outsourcing forestry operations in the hyperinflationary economic environment of Zimbabwe

Outsourcing forestry operations in a hyperinflationary environment has an impact on labour welfare, quality of work and the environment. The aim of this research was to determine how the current economic environment in Zimbabwe has impacted on the outsourcing of forestry operations. The study was carried out in the Penhalonga Commercial Forest Region (18.52S, 32.40E), north of the city of Mutare, in the eastern highlands of Zimbabwe. The research involved gathering historical data, interviews and direct observations of productivity. To evaluate the viability and sustainability of subcontracting forest operations, contractor productivity and machine availability were assessed as the outsourcing indicators. A comparison of production costs of saw-logs and silvicultural operations between contactors and the forest company harvesting teams were used to determine the effectiveness of outsourcing. Results indicated significant machine availability and productivity among contractors with little or no employee welfare for contractors. The combined volumes produced by contractors met company expectations, even though individual contractors do not meet the targets. Production costs increased every month for both contractors and the forest companies thus defeating the cause of cost cutting for the forest companies. In a hyperinflationary environment outsourcing forest operations can only be a bandage and not a long term solution. Key words: Outsourcing, timber harvesting, sustainability, productivity, contractor, fixed period employees, permanent employees.

Water management in a hyperinflationary environment: Case study of Nkayi district in Zimbabwe

This paper discusses the management of local drinking water supplies in Nkayi, a poor rural district in Zimbabwe. The government policy of rural development has evolved a national sector strategy for water and sanitation, implemented through an Integrated Rural Water Supply and Sanitation (IRWSS) programme 1987–2000, with largely donor funding. One aspect of the programme has seen the construction and upgrading of communally-owned boreholes and deep-wells in villages to allow continuous access to sufficient and safe drinking water within a reasonable walking distance. However, due to dwindling state resources and budgetary constraints, since the 1990s, government has been decentralising service provision to local communities’ including water supply. This paper reveals how eight villages in Nkayi have qualitatively managed to innovatively sustain reliable water supply to continue to meet domestic demand despite the challenges of acute water shortages and the burden of rising maintenance costs due to hyperinflation. Despite an unfavourable economic environment, a unique cost-sharing and resource mobilization process by the community, Nkayi has ensured that 87 per cent of water points remain functional.

Does the Lucas critique apply during hyperinflation?: empirical evidence from four hyperinflationary episodes

Farmer (Review of Economic Studies, 58, 321–32, 1991) suggests that in a model in which there are multiple rational expectations equilibria agents may find it useful to coordinate their expectations in a unique rational expectations equilibrium which is supported by a self-fulfilling forecast rule having the property of being immune to the Lucas Critique. In this paper, Farmer's hypothesis is tested using data from hyperinflationary episodes. It is believed that those episodes are suitable for testing this hypothesis because an agent who lives in a hyperinflationary environment usually faces frequent changes in policy regime. The agent may thus choose a selffulfilling forecast rule which is immune to the Lucas Critique as a way of hedging against unanticipated policy regime switches. The empirical results show mixed evidence on Farmer's hypothesis during the hyperinflationary episodes studied.

The value relevance of inflation-adjusted and historical-cost earnings during hyperinflation

In Israel, publicly traded companies have been required to present financial statements based on the real purchasing power of the Israeli currency since 1985. Supplementary historical-cost data are provided in detailed notes to the financial statements including the balance sheet and the income statement. In the U.S., the FASB (1986) made the requirement to disclose the effect of price changes on earnings optional (SFAS 89). Consequently, publicly traded companies began suppressing inflation-adjusted earnings (IAE) disclosures. Most studies conclude that current cost earnings and constant dollar earnings provided marginal or even no information content in the U.S. This study examines the value relevance of unexpected IAEs and historical-cost earnings (HCE) in the Israeli hyperinflationary environment. A sample of 106 publicly traded manufacturing firms is used. The sample comprises over 97 percent of the publicly traded manufacturers in Israel during the mid-1980s. Cross-sectional annual and pooled regression models are estimated across the triple-digit annual inflation rates from 1984 through 1985 and the double-digit rates from 1986 through 1988. The results show that unexpected IAEs are value-relevant beyond unexpected HCEs, which are not value-relevant to investors in the hyperinflationary Israeli economy. The findings tend to be statistically significant when unanticipated inflation rates are notably high.

Accounting Valuation and Current Cost Disclosures: The Case of Mexico

This study investigates the relation between the market value of publicly traded Mexican firms and their disclosures of accounting information adjusted for changing prices. The volatile hyperinflationary environment in Mexico provides an ideal setting for investigating the value relevance of inflation accounting disclosures. Specifically, I investigate the only accounting information that is required in the body of the financial statements: general price level-adjusted and current cost disclosures. Extending the work of Edwards and Bell (1961) and Ohlson (1995), I estimate a valuation model that relates inflation accounting disclosures to firm value. The results indicate that general price level-adjusted and current cost disclosures explain a significant portion of the cross-sectional variation in the market value of Mexican firms. Further, the explanatory power of holding gains is robust to inflation rates that vary from 130% to 20%. These results suggest that current cost and constant peso disclosures are relevant for determining firm value over a wide range of inflation rates.