Alikhan272

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Macro economics

• Name Ali Fraz Khan
• Id 1174-1001436
• Program BBA
• Campus Main
• Topic Hyperinflation

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Hyperinflation In Zimbabwe
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100,000,000,000,000
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Hyperinflation defined

• Begins when monthly inflation rates exceed 50
  percent
• Ends when rate falls under 50 percent where it
  must stay for a year Philip Cagan (1956)
• Zimbabwe entered hyperinflation period in March
  2007 ended in 2009
• Zimbabwe marked 30th such episode in history

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Overview

• Introduction to Zimbabwe
• Before and during hyperinflation
• Zimbabwes inflation nightmare
• Effects of hyperinflation
• Stopping spiraling inflation
• Life after hyperinflation

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Facts about Zimbabwe

• Located in Southern Africa
• Bordered by Zambia, Mozambique, S. Africa,
  Botswana
• 150,871 square miles
• About the size of California
• 2011 population 12.7 million
• Colonized by the British
• Gained independence in 1980
• Robert Mugabe 1st prime minister
• Agricultural economy
• Main cash crop is tobacco
• First country to experience hyperinflation in
  the 21st century

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Before and During Hyperinflation
1980
Annual inflation at 5.4 percent
Largest currency denomination Z20
Z used in 95 percent of transactions
1US exchanged for Z0.65
Real GDP expanded 14.6 percent
Real GDP per capita at US 232
Unemployment rate at 10.8 percent in 1982
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Before and During Hyperinflation
1980 20082009
Annual inflation at 5.4 percent Inflation at 231 million percent
Largest currency denomination Z20 Largest Z denomination Z100 trillion
Z used in 95 percent of transactions US, S.A rand used in almost all transactions
1US exchanged for Z0.65 1US officially traded for Z4million in 2008
Real GDP expanded 14.6 percent Real GDP contracted by 17 percent
Real GDP per capita at US 232 Real GDP per capita at US 136
Unemployment rate at 10.8 percent in 1982 Unemployment rate at 94 percent
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After Hyperinflation
20102011
Z no longer in circulation
US used in all transactions
Annual inflation averaged 3 percent
Real GDP expanded 9 percent
Real GDP per capita increased 6 percent
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Inflation soars amidhyperinflationary period
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Zimbabwes tobacco production declines
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Population and labor force decline
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Effects of hyperinflation
a loaf of bread now costs what 12 new cars did
a decade ago, and a small pack of locally
produced coffee beans costs just short of 1
billion Zimbabwe dollars. A decade ago, that sum
would have bought 60 new cars.
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Stopping spiraling inflation

• Inflation expectations play a crucial role
• Government finance must be credible
• Adoption of an independent central bank
• Alteration of fiscal regime
• Exchange rate stabilization
• Adoption of a more credible currency

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Post-hyperinflation Zimbabwe

• Encouraging signs of recovery

• Inflation down to single digits
• 2010 GDP expanded 9 percent
• GDP per capita expanded
• 6 percent in 2010

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Challenges remain

• Rebuild public finances trust
• Institute policies to control government spending
• Reduce poverty
• Promote economic growth

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Summary

• Zimbabwe First country to experience
  hyperinflation in 21st century
• Excess money supply not backed by economic growth
  leads to loss of confidence in currency
• Hyperinflation produces adverse impacts
• Z100 trillion largest denomination in the
  history of money
• Zimbabwes case a reminder of what happens when
  inflation and fiscal balances go unchecked

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Thank You