Dollarization: The Case of Zimbabwe

Abstract

This article investigates the recent monetary experience of Zimbabwe with dollarization. It shows how dollarization has allowed Zimbabwe to quash hyperinflation, restore stability, increase budgetary discipline, and reestablish monetary credibility. Zimbabwe’s hyperinflationary past and the stabilization measures taken by the government are outlined, and the consequences defined. Problems arising from a lack of financial integration, an error in the choice of currency to dollarize under, and the inability of the government to enter into a formal dollarization agreement are discussed.

Keywords: hyperinflation remedies, African economics, monetary systems, monetary policy, monetary crisis, central bank

JEL Classification: E40, E42, E52, E60, N17