African Review of Economics and Finance

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The role of monetary policy in Zimbabwe's hyperinflation episode

William Kavila, Pierre Le Roux


This paper explores the role of monetary policy in Zimbabwe’s hyperinflation episode, using the Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) approaches with monthly data from 2006:01 to 2008:07. Results from both the ECM and ARDL approaches show that during the study period, hyperinflation was caused by expansionary monetary policy, the exchange rate premium and inflation expectations for both the short and long-term. Zimbabwe’s hyperinflation episode brings to the fore the importance of ensuring that the Central Bank is independent in executing its mandate of influencing the monetary policy process in a manner that ensures price stability.

Keywords: Monetary Policy; Hyperinflation; Autoregressive Distributed Lag; Error Correction Model

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