Investigating the Impact of Dollarization on Economic Growth: A Case of Zimbabwe

Abstract

This study examined the effects of dollarization on business in Zimbabwe focusing on economic indicators such as inflation rate, GDP, employment and ease of doing business during the period 2009-2015. Zimbabwe experienced a very difficult economic phase characterised by hyperinflation, negative economic growth, unavailability of basic commodities and negative economic growth rates during the period 1998-2008. In 2009 the country adopted a multi-currency system whereby the Zimbabwean dollar was in circulation alongside various other currencies, with the United States Dollar and the South African Rand being the dominant ones. There has been general speculation that Zimbabwe’s economic problems are due to dollarization. Through analysing data from interviews and secondary sources, the research established that dollarization brought about stability in the economy, arrested inflation, and caused a marginal increase in GDP. However, the response of the employment rate was independent of the dollarization and may be attributed to other factors such as Economic Structural Adjustment Programme (ESAP) in 1992, the global economic crisis in 2008 and the absence of reliable data.