Abstract
This chapter describes the new price series for Zimbabwe constructed in McIndoe-Calder (Applied Economics 50 (15): 1659–1675, 2018). A credible price series allows us to measure the hyperinflation in Zimbabwe accurately for the first time and compute the real money balances held in the country over time. We discuss the quality challenges facing official price data in some historical examples of hyperinflations as well as the Zimbabwean hyperinflation. We then describe several alternate price series available in Zimbabwe during the hyperinflation and establish a set of criteria to choose the most optimal price series. Details of how the three data sources that contribute to the new price series are then discussed, as well as the steps taken to merge these series into the new composite exchange rate series. The structural change variables described in Chap. 5 are plotted alongside the new price series.
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Notes
- 1.
Refer to Cagan (1956), Appendix B (page 96) for data and sources.
- 2.
Detailed data sources described in the Appendix.
- 3.
All ZWD denominated data is transformed to reflect the 2006–2008 dollar that is, in August 2006 three zeros were removed from the currency and in August 2008 ten zeros were removed from the currency to allow reintroduction of lower denomination notes in order to cope with the very high rates of inflation.
- 4.
Budget data is annual from 1980–1997, quarterly from 1998–2005Q2 and monthly from 2006–2007.
- 5.
Aid data is annual.
- 6.
OECD, Development Assistance Committee.
- 7.
Using an exchange rate differential as the alternate price series assumes that purchasing power parity (PPP) holds (Taylor 2002). Indeed, during high levels of inflation over the time period of interest in Zimbabwe, foreign consumer price inflation is minimal.
- 8.
Mr Nyoni, 2008 director of the CSO in Harare, confirmed this via telephone in April 2008. The CPI data is gathered between the 13th and 17th of each month. The CSO data is gathered from a panel of retail outlets (supermarkets, corner shops, vegetable markets and some informal markets).
- 9.
For example, for the latter years covered by our price data, private school fees must be adjusted in line with the CPI, minimum wage adjustments are also linked to CPI data etc.
- 10.
Gathered from similar sources to the CER for the early 2000s.
- 11.
Coinciding with the introduction of a crawling exchange rate peg, Mabugu (2001) as well as a severe drought.
- 12.
Coinciding with liberalisation and the operationalisation of the crawling exchange rate peg as well as another severe drought.
- 13.
This price series is higher than the “cash value” as the RTGS system took several days to clear, and so the currency’s devaluation in the intervening time is priced into the cost of using this method.
- 14.
The basket of goods relevant to the non-CPI series relates to those products for which the price series is applicable.
- 15.
When the difference between consecutive index numbers in the price series become very large (e.g. during accelerating hyperinflation) simple proportional growth rates do not equate to logarithmic growth rates as they do when differences between monthly prices are small. In these cases using logarithmic growth rates is the most internally consistent choice, monthly growth rates sum to annual growth rates when using logarithmic growth rates in a way that proportional growth rates do not, due to compounding.
- 16.
Cubic spline interpolation is carried out to obtain a monthly series.
- 17.
The RealMB series is denoted in millions of USD (as the nominal money data have been deflated by an exchange rate). The comparable CPI deflated series has been rebased so that the CPI = 100 in July 1994.
- 18.
Cato Institute, http://www.cato.org/zimbabwe.
- 19.
The hyperinflation likely continued until the suspension of the domestic currency in February 2009; however, CER data is available only up to October 2008.
- 20.
All ZWD denominated data is transformed to reflect the 2006–2008 dollar that is, in August 2006 three zeros were removed from the currency and in August 2008 ten zeros were removed from the currency to allow reintroduction of lower denomination notes in order to cope with the very high rates of inflation.
- 21.
From an (unpublished) document compiled to establish (fair) compensation for commercial farmers affected by the Fast Track Land Reform Programme (FTLRP).
- 22.
This series is derived from surveying businessmen in Harare on the actual rates they used to buy and sell foreign currency on the black market, established through correspondence with Techfin, Zimbabwe and with John Robertson, an economist in Harare, summer 2008.
- 23.
Budget data is annual from 1980–1997, quarterly from 1998–2005Q2 and monthly from 2006–2007.
- 24.
Aid data is annual.
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———. 2018. Hyperinflation in Zimbabwe: Money Demand, Seigniorage and Aid Shocks. Applied Economics 50 (15): 1659–1675. https://doi.org/10.1080/00036846.2017.1371840.
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Appendix: Data Sources
Appendix: Data Sources
Data is monthly from January 1980 to early 2008.Footnote 20 The variables of interest are drawn from:
The consumer price index (CPI):
-
IMF International Financial Statistics (IFS), 1980–2007; and
-
Reserve Bank of Zimbabwe (RBZ) Monthly Statistics, 2007–2008.
Composite exchange rate (CER) data:
-
World Currency Yearbooks, 1980–1993;
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Professor A. HawkinsFootnote 21 (this data is quarterly), 1994–1999; and
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Techfin (Zimbabwe), Parallel Market Rate, 2000–2008.Footnote 22
Government budgetFootnote 23 and overseas development assistance dataFootnote 24 (ODA):
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OECD, Development Assistance Committee (DAC), 1980–2008;
-
The Economics Intelligence Unit, “Country Reports” and “Country Profile” series, 1980–2007; and
-
RBZ, 2006–2007.
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McIndoe-Calder, T., Bedi, T., Mercado, R. (2019). Data and a New Price Index. In: Hyperinflation in Zimbabwe. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-31015-8_6
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