Zimbabwe: Grappling with Hyperinflation

15 Pages Posted: 5 Apr 2010

See all articles by Peter Marcel Debaere

Peter Marcel Debaere

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

Abstract

This case will lead students to a discussion of the causes and effects of hyperinflation. The link with fiscal deficits is explored, and so is the link with societal changes. The particular focus is on the hyperinflation in Zimbabwe under President Robert Mugabe whose government implemented a controversial land redistribution program. The case can be taught with a class experiment—see teaching note.

Excerpt

UVA-G-0599

Rev. May 30, 2012

Zimbabwe: Grappling with Hyperinflation

In 2007, the southern African nation of Zimbabwe (Exhibit 1) faced major challenges. The World Health Organization put the life expectancy of men at 37 years and of women at 34 years, the lowest in the world in 2006 (Exhibit 2). Some estimates put unemployment for 2007 in the range of 70% to 80%. Others suggested that the gross domestic product (GDP) had dropped by between 40% and 60% between 2000 and 2007 (Exhibit 3). After 2000, economic policies plunged the country into growing economic and political turmoil that exacerbated an already difficult drought situation. Large-scale famine and political repression was rampant. The country made headlines for having the highest inflation in the world.

Living with Hyperinflation

In May 2006, the New York Times reported that toilet paper was sold for (Zimbabwe dollars) ZWD417. This was not the price per roll, but per single, two-ply sheet. A roll cost ZWD145,750. The price of many products, including that of paper, had risen dramatically and had reportedly spawned jokes about an impending better use for Zimbabwe's 500 dollar bill, which was the smallest in circulation at the time. Even funeral costs soared. In rural areas, the simplest type of funeral cost more than ZWD6 million in May 2006. The dead were being buried at night in the fields, and cupboards were being used as coffins.

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Keywords: hyperinflation, Zimbabwe, inflation

Suggested Citation

Debaere, Peter Marcel, Zimbabwe: Grappling with Hyperinflation. Darden Case No. UVA-G-0599, Available at SSRN: https://ssrn.com/abstract=1583768

Peter Marcel Debaere (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/html/direc_detail.aspx?styleid=2&id=5794

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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