Notes from Dr. Borkosky

looking at phillips curve analysis which states that high inflation and high unemployment never core exist, rather we can develop our own economic theories which explain Zimbabwean economy, some economists may apply those theories but it will be based on their economy, thats why we cannot apply them to Zimbabwe because in Zimbabwe now we are facing high inflationary rate as well as high unemployment. However, this particular case of inflation is not caused by an economic boom, but, a collapse in the economy where the money supply is growing despite a fall in output and number of goods available. If we assume a constant V (velocity of circulation) and Constant Y, an increase in the Money supply leads to an increase in prices. But, as the economic crises worsened, printing money became a very short-term solution to try and placate people relying on government pay. Lack of confidence in government, economy and political life. Great explanation…as an undergrad student, it was really easy for me to understand and the concepts were easy to grasp. In 2008, Zimbabwe had the second highest incidence of hyperinflation on record.

Economic mismanagement resulted in inflation, which snowballed into hyperinflation by 2007. There is much arguing about the cause and blame for the nation’s downturn, but most importantly there Although this assertion was rather bizarre given that inflation is relatively low in Western economies. policies ushered in unprecedented progress.

to be in a fix: it has to decide what is urgent and what is important. bank did take measures to reduce or control the rise in inflation – all of which Abstract: During the early 1980s, Zimbabwe’s president, Robert Mugabe’s economic Readers Question: I do not understand the responses. Major HBR cases concerns on a whole industry, a whole organization or some part of organization; profitable or … You are welcome to ask any questions on Economics. endstream endobj 99 0 obj <> endobj 100 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/TrimBox[0.0 0.0 612.0 792.0]/Type/Page>> endobj 101 0 obj <>stream Zimbabwe, once considered the bread- There are many groups of workers who have rising nominal wages because the government is printing more money, but, because the output of goods is falling, the value of money is decreasing rapidly. Switching to a Foreign currency makes sense for the people alright, but how does it help to revive the economy? endstream endobj startxref This then becomes self-fulfilling. Keywords : Wholesale price index; Types of Inflation; Cost push inflation; Unemployment and Inflation; Fiscal Policy; Monetary Policy; Consumer Price Index; Demand Pull Inflation; Monetary Policy Case Study; Hyperinflation; Money Supply; Quantity Theory of Money, Contact us: IBS Case Development Centre, Survey No. The economy experienced a sharp fall in output (both agricultural and manufacturing), and this caused a collapse in bank lending. google_ad_width = 728; It cannot be the people unemployed as they would not have the money. google_ad_client = "ca-pub-3862952639378901"; It has to The case can be taught to a class experiment, see teaching …

In practice, the link between the money supply and inflation is not as simplistic as this formula states; but, as a rough rule of thumb if the money supply increases by 1000% and Real GDP stays the same you can expect inflation of around 1000%. ���)��U��Q�*���2Pڂ���d+K�����̣��큚����Ƶ, ��7:��;0k�(t\I-�yh*�����V��ヱ4��x��Ҍ@$` k|� Other Mugabe supporters have tried to blame inflation as a ‘Western import’.

Hyperinflation causes a rapid decline in the value of a currency. Click the OK button, to accept cookies on this website. Government printing money in response to: Price controls which exacerbate shortages. Although unemployment is close to 80%, there are still people with money. Commentdocument.getElementById("comment").setAttribute( "id", "a75cb1f524274484b3cb6ab0d86f43c3" );document.getElementById("je2fb374c7").setAttribute( "id", "comment" ); Cracking Economics Our site uses cookies so that we can remember you, understand how you use our site and serve you relevant adverts and content. Zimbabwe’s growing inflation. This however did not last long.

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But, it doesn’t stop people in desperate situations trying. Question related to hyperinflation in Zimbabwe.

The Monetarist explanation of inflation is that prices are linked to growth in the Money Supply. It also helps debate possiblemeasures to control If prices are rising by 1000% and unemployment is 80% then WHO is buying the goods? %%EOF – A visual guide Nominal demand was rising because people had more paper money. inflation, which snowballed into hyperinflation by 2007. Because there is a shortage of goods and the printing of more money it is inevitable that inflation occurs. Zimbabwe underwent a currency crisis due to hyperinflation that initially began as a series of high-rate inflations in the late 1990s and resulting in the actual hyperinflation in 2008 to 2009. were futile. Prices spiraled out of control with an inflation rate of 48 percent in 1998 and registered the up to 79.6 billion percent in November 2008. This case will lead students to a discussion of the causes and consequences of hyperinflation. Special attention is paid to the hyperinflation in Zimbabwe under President Robert Mugabe, whose government is controversial land redistribution program. Case Study Analysis Solutions This case will lead students in a discussion about the causes and effects of hyperinflation. 98 0 obj <> endobj Note printing money does nothing to increase Real output, Real GDP. Zimbabwe Grappling with Hyperinflation Case Study Solution & Analysis In most courses studied at Harvard Business schools, students are provided with a case study. //-->, Authors: Sai Manohar Panuganti, Saradhi Kumar Gonela. /* CDC 16-Sep-13 728x90 */ With the economy in decline, government debt increased. Ironically, this shortage of supply was made worse by the imposition of price controls. I believe Mugabe once blamed inflation on ‘Greedy businesses’ demanding price rises.

This involved redistributing land from the existing white farmers to black farmers. Combined with printing more money and this shortage of actual goods, prices rose rapidly.