Is Money Supply the Cause of Inflation in Zimbabwe? An Empirical Examination

Authors

  • Alexander Maune University of South Africa
  • Ephraim Matanda Great Zimbabwe University
  • Justice Mundonde University of the Witwatersrand

Keywords:

Money Supply; M3; Inflation; Monetary policy; Empirical Examination; Zimbabwe

Abstract

Abstract: In this article, we used a multiple linear regression model to empirically examine the nexus
between money supply and inflation in Zimbabwe during the period 1980 to 2019. To obtain an in
depth analysis of that relationship, data were obtained from IMF – International Financial Statistics,
World Bank and other credible, reliable and valid sources. Our empirical results show that inflation was
directly related to money supply and inversely related to exchange rates and fiscal deficits in Zimbabwe
for the period understudy. We, therefore, recommend that the growth of money supply should be made
to match real economic growth as this was the basis of Milton Friedman’s monetary rule that holds
inflation as a purely a monetary phenomenon that can only be produced by expanding the money supply
at a faster rate than the growth of capacity output. This article is valuable to monetary authorities,
economists, researchers and the public.

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Published

2020-07-13

How to Cite

Maune, A. ., Matanda, E. ., & Mundonde, J. . (2020). Is Money Supply the Cause of Inflation in Zimbabwe? An Empirical Examination: Array. Acta Universitatis Danubius. Œconomica, 16(3). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/372

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Section

Business Administration and Business Economics

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