HYPERINFLATION IN ZIMBABWE

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HYPERINFLATION IN ZIMBABWE
KIRIL STANOEV IGOR POKRYSHEVSKIY  
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INFLATION
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INFLATION

• What is inflation?

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INFLATION

• What is inflation?
• a sustained rise in the average level of prices

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INFLATION

• What is inflation?
• a sustained rise in the average level of prices
• Types of inflation (The Triangle Model)

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INFLATION

• What is inflation?
• a sustained rise in the average level of prices
• Types of inflation (The Triangle Model)
• Demand-pull inflation aggregate demand in an
  economy outpaces aggregate supply

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INFLATION

• What is inflation?
• a sustained rise in the average level of prices
• Types of inflation (The Triangle Model)
• Demand-pull inflation aggregate demand in an
  economy outpaces aggregate supply
• Built-in inflation results from past events
  that persist in the present

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INFLATION

• What is inflation?
• a sustained rise in the average level of prices
• Types of inflation (The Triangle Model)
• Demand-pull inflation aggregate demand in an
  economy outpaces aggregate supply
• Built-in inflation results from past events
  that persist in the present
• Cost-push inflation occurs when there is a
  substantial increase in the cost of imported
  goods or services, when there are no suitable
  alternatives available.

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INFLATION

• What is inflation?
• a sustained rise in the average level of prices
• Types of inflation (The Triangle Model)
• Demand-pull inflation aggregate demand in an
  economy outpaces aggregate supply
• Built-in inflation results from past events
  that persist in the present
• Cost-push inflation occurs when there is a
  substantial increase in the cost of imported
  goods or services, when there are no suitable
  alternatives available.
• Inflation is considered desirable when at low
  rates

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HYPERINFLATION
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HYPERINFLATION
IS DESTRUCTIVE
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HYPERINFLATION
IS DESTRUCTIVE

• What is hyperinflation?

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HYPERINFLATION
IS DESTRUCTIVE

• What is hyperinflation?
• any inflation exceeding 50 per month (12,875
  per year)

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HYPERINFLATION
IS DESTRUCTIVE

• What is hyperinflation?
• any inflation exceeding 50 per month (12,875
  per year)

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HYPERINFLATION
IS DESTRUCTIVE

• What is hyperinflation?
• any inflation exceeding 50 per month (12,875
  per year)
• EXCESSIVE MONEY SUPPLY

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HYPERINFLATION
IS DESTRUCTIVE

• What is hyperinflation?
• any inflation exceeding 50 per month (12,875
  per year)
• EXCESSIVE MONEY SUPPLY
• Why?

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HYPERINFLATION
IS DESTRUCTIVE

• What is hyperinflation?
• any inflation exceeding 50 per month (12,875
  per year)
• EXCESSIVE MONEY SUPPLY
• Why?
• because the government spends more money than it
  collects through taxes and charges

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HYPERINFLATION
IS DESTRUCTIVE

• What is hyperinflation?
• any inflation exceeding 50 per month (12,875
  per year)
• EXCESSIVE MONEY SUPPLY
• Why?
• because the government spends more money than it
  collects through taxes and charges
• ? leads to the printing of money to fill the gap
  between revenue and expenditure

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HYPERINFLATION
EFFECTS OF
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HYPERINFLATION
EFFECTS OF

• Transfer of wealth from the money holders
  (general public) to money printers (government)

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HYPERINFLATION
EFFECTS OF

• Transfer of wealth from the money holders
  (general public) to money printers (government)
• People prefer to pay in commodities than in
  printed money

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HYPERINFLATION
EFFECTS OF

• Transfer of wealth from the money holders
  (general public) to money printers (government)
• People prefer to pay in commodities than in
  printed money
• cigarettes in post-war Germany

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HYPERINFLATION
EFFECTS OF

• Transfer of wealth from the money holders
  (general public) to money printers (government)
• People prefer to pay in commodities than in
  printed money
• cigarettes in post-war Germany
• Borrowers can profit at the expense of lenders
  when signing loan contracts before an unexpected
  hyperinflation

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HYPERINFLATION
EXAMPLES OF
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HYPERINFLATION
EXAMPLES OF

• Germany 1922-23

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HYPERINFLATION
EXAMPLES OF

• Germany 1922-23
• inflation rate 322 per month

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HYPERINFLATION
EXAMPLES OF

• Germany 1922-23
• inflation rate 322 per month
• How it ended?

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HYPERINFLATION
EXAMPLES OF

• Germany 1922-23
• inflation rate 322 per month
• How it ended?
• new currency introduced Rentmark

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HYPERINFLATION
EXAMPLES OF

• Germany 1922-23
• inflation rate 322 per month
• How it ended?
• new currency introduced Rentmark
• attached to the USD at rate 1 4.2 RM

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HYPERINFLATION
EXAMPLES OF

• Germany 1922-23
• inflation rate 322 per month
• How it ended?
• new currency introduced Rentmark
• attached to the USD at rate 1 4.2 RM

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313 per month

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 3130 per month

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 31300 per month

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313000 per month

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 3130000 per month

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 31300000 per month

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313000000 per month

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313,000,000 per month

313 MILLIONS
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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313,000,000 per month
• How it ended?

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313,000,000 per month
• How it ended?
• new currency introduced Super-dinar

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313,000,000 per month
• How it ended?
• new currency introduced Super-dinar
• attached to the German Mark at rate 11

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HYPERINFLATION
EXAMPLES OF

• Yugoslavia 1992-94
• far worse than the hyperinflation in Germany
• inflation rate 313,000,000 per month
• How it ended?
• new currency introduced Super-dinar
• attached to the German Mark at rate 11

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INFLATION
RATE

• Highest rate was 79,600,000,000 per month
• Means Zimbabwean dollar lost 50 of value every
  day

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INFLATION
ROOT OF

• Land redistribution
• Before policy comes into effect, most fertile
  farmland is held by minority whites
• Redistribution policy
• Buy land from farmers (usually forcibly)
• Give to poorer black farmers
• Backfired when the poor, unskilled farmers
  couldnt efficiently utilize modern farms

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REDISTRIBUTION
RESULTS OF
LAND

• Agricultural output fell
• Unemployment of farmers and, eventually, other
  workers
• Loss of tax revenues

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GOVERNMENT
POSITION OF

• Government had many expenses
• Keeping the economy afloat
• Maintaining salaries of government officials,
  allies, key supporters
• Maintaining power structure that would ensure
  Mugabe would stay in power
• Law order, control of media

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GOVERNMENT
ACTION

• Mugabes government had little money to spend,
  couldnt balance budget
• Started printing money to pay for spending
• Inflation, already serious, spiraled out of
  control from the excess money supply

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Thank You!
Questions?