n Journal of Strategic Studies : A Journal of the Southern Bureau of Strategic Studies Trust - Dollarisation and monetary aggregates in Zimbabwe : 2009-2012

Volume 4, Issue 1
  • ISSN : 2076-6645
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This study investigates monetary aggregates for Zimbabwe and evaluates their performance against income. The most commonly used definitions of money - usually allocated the symbols M1, M2 and M3 is dependent on the degree of substitutability of the various monetary assets for currency and demand deposits. This study employed the Friedman and Meiselman (1963) approach to determine which monetary aggregate and monetary component has the highest correlation with income. This will enable the definition of the appropriate monetary aggregate for Zimbabwe. The monetary aggregates employed are sourced from the Reserve Bank of Zimbabwe for the period 2009-2012. The GDP growth rates used are two years before (earlier) two years into the future (later) - and current. It is found that commercial bank deposits over 30 days under the current criterion is the most appropriate monetary aggregate for Zimbabwe since it has the highest correlation with income of 0.809 with GDP while the M3 aggregate had the highest correlation coefficient of 0.916 with GDP thus fulfilling the F-M dual criterion.

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