Macroeconomics Case Study

Hyperinflation in Zimbabwe: Robert Mugabe Thrives, Economy Suffers

OR

Abstract: During the early 1980s, Zimbabwe’s president, Robert Mugabe’s economic policies ushered in unprecedented progress. This however did not last long. By mid-1980s,Mugabe’s regime substituted economic gains for political motives in macroeconomic policy formulation. Economic mismanagement resulted in inflation, which snowballed into hyperinflation by 2007. Zimbabwe’s central bank did take measures to reduce or control the rise in inflation – all of which were futile. Economists predict that inflation may soon touch 100,000%, if it grows unarrested.

The case study helps analyse the nature and causes of various kinds of inflation, and their impact on the economy. It also helps debate possiblemeasures to control Zimbabwe’s growing inflation. Deep analysis reveals Zimbabwean central bank to be in a fix: it has to decide what is urgent and what is important. It has to contain inflation urgently.More importantly, a growthmechanismis needed.Yet how should these two goals be balanced – an economic quandary, to be resolved by the class.

Pedagogical Objectives:

• To understand different types of inflation and their characterstics
• To analyse different types of inflation indices
• To study the reasons for and effect of hyperinflation
• To understand the causes of hyperinflation in case of Zimbabwe
• To analyse themeasures taken by central bank to fight hyperinflation.

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