Suppressed Inflation and Money Demand in Zimbabwe
IMF Working Papers, January 1, 2006
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- Suppressed Inflation and Money Demand in Zimbabwe
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Bibliographic details
- Authors: Sònia Muñoz
- Published: January 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451862751.001
Overview
- The paper investigates the divergence between inflation and monetary expansion in Zimbabwe since late 2003.
- Author: Sònia Muñoz.
- Date: January 1, 2006.
- Series: Working Paper No. 2006/015 (Issue: 015, Volume: 2006).
- Pages: 20.
- DOI: https://doi.org/10.5089/9781451862751.001.
- Stock No: WPIEA2006015.
- ISBN: 9781451862751.
- ISSN: 1018-5941.
Key empirical findings
- There was a substantial decline in velocity during 2004.
- There were increasing levels of real money balances during 2004.
- The joint pattern of declining velocity and rising real money balances in 2004 is at odds with Zimbabwe's past record in which inflation closely tracked the growth rates of monetary aggregates.
Possible explanations examined
- An unstable demand for money.
- A sudden shift in the underlying demand for real balances due to a sharp change in an explanatory variable.
- A structural break or aberration in a normally stable money demand relation reflecting some unexplained factor such as:
- repressed inflation (given administered prices), or
- measurement errors in the consumer price index.
Conclusion of the study
- The results of the study point to the last possibility — a structural break or aberration reflecting repressed inflation or measurement errors in the consumer price index — as the most likely explanation for the observed divergence.
Source: "Suppressed Inflation and Money Demand in Zimbabwe", Sònia Muñoz, IMF Working Papers 2006, 015 (2006); DOI: https://doi.org/10.5089/9781451862751.001.