n Journal of Strategic Studies : A Journal of the Southern Bureau of Strategic Studies Trust - Sub-Saharan time-consistency : a comparison of SADC and the RBZ law
|Article Title||Sub-Saharan time-consistency : a comparison of SADC and the RBZ law|
|© Publisher:||Southern Bureau of Strategic Studies Trust|
|Journal||Journal of Strategic Studies : A Journal of the Southern Bureau of Strategic Studies Trust|
|Affiliations||1 University of Zimbabwe and 2 University of Zimbabwe|
|Publication Date||Jan 2011|
|Pages||63 - 87|
|Keyword(s)||Governance, Hyperinflation, MCBL, RBZ, SADC and Time-consistency|
This paper is motivated by the recent publication of the amended Reserve Bank of Zimbabwe Act (2010). It is the purpose of this paper to compare the Reserve Bank of Zimbabwe Act chapter 22:15 of the laws of Zimbabwe (2010) with the Southern Africa Development Community (2008) Model Central Bank Law (MCBL). The comparative study will be made in the context of resolving the time consistency problem (policy reversals). The Government of National Unity motivated by the belief that the governance of the central bank was weak embarked on a mission to amend the governing act in order to prevent a recurrence. It is in this context that we compare the Reserve Bank Act as amended in 2010 to the Southern African Development Community (SADC) MCBL of 2008. Our findings were that the RBZ act falls short of the principles enshrined in the SADC MCBL. As a result it may not resolve the trust deficit between the Bank and economic agents arising from time-consistency problem as identified by Kydland and Prescott (1977) and attain the social objective function of price and financial stability.
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