Economic policymakers seek to achieve high employment, rapid growth and stable prices. I am most interested in the role of monetary policy – what it can contribute, and most importantly, how it should be conducted to contribute the most. It is a fact that there is strong correlation between central bank independence and effective output stabilization. At the heart of Zimbabwe’s economic meltdown is a central bank that has amassed a plethora of controls that go beyond its remit. Substantial quasi-fiscal activities by the Reserve Bank of Zimbabwe (RBZ) have been at the core of the country’s headline-making hyperinflation. Such activities include subsidies made to loss making government-owned enterprises, price supports given to some export sectors, and the interest payments made on open market operations. These activities have eroded the bank’s ability to conduct monetary policy. The RBZ’s solution – printing more money, and freezing prices and wages – has been like pouring water on...
Economics, Data Science, Consulting