Africa > Zimbabwe

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Ms. Sandra Marcelino and Ms. Ivetta Hakobyan
In 1996, the IMF and the World Bank introduced the Heavily Indebted Poor Countries Initiative—a comprehensive debt relief program aimed at reducing the external debt burden of eligible countries to sustainable levels, provided they carry out strong programs of macroeconomic adjustment and structural reforms designed to promote growth and reduce poverty. Now that the HIPC Initiative is nearly completed, this paper investigates whether the initiative managed to spur growth, either directly or indirectly through investment. In contrast to earlier studies, we conclude that there is some evidence of positive effects of the HIPC Initiative on growth. Such evidence suggests that the HIPC Initiative and MDRI have helped HIPC-eligible countries to reach higher growth, but it remains unclear whether this is through higher investment or another channel. Also, the analysis illustrates that it is hard to disentangle pure debt-relief effects from other concurrent factors.
Mr. Manuk Ghazanchyan and Ms. Janet Gale Stotsky
This study examines the drivers of growth in Sub-Saharan African countries, using aggregate data, from the past decade. We correlate recent growth experience to key determinants of growth, including private and public investment, government consumption, the exchange regime and real exchange rate, and current account liberalization, using various econometric methodologies, including fixed and random effects models, with cluster-robust standard errors. We find that, depending on the specification, higher private and public investments boost growth. Some evidence is found that government consumption exerts a drag on growth and that more flexible exchange regimes are beneficial to growth. The real exchange rate and liberalization variables are not significant.
Mr. Arto Kovanen
This study examines the appropriateness of alternative intermediate monetary policy targets for Zimbabwe in light of the stability of the demand for money and the information content of financial variables for predicting price level movements. Results of the study indicate that a well-defined long-run demand relation exists for currency in circulation, but not for other monetary aggregates. Currency in circulation has strong information content for predicting future price level movements. The information content of other financial variables, such as the exchange rate and interest rates, is weaker. Statistical relationships break down of the outset of high inflation.
Mr. Saleh M. Nsouli

This paper describes the need to broaden the agenda for poverty reduction. The broadening of the agenda follows from a growing understanding that poverty is more than low income, a lack of education, and poor health. The poor are frequently powerless to influence the social and economic factors that determine their well being. The paper highlights that a broader definition of poverty requires a broader set of actions to fight it and increases the challenge of measuring poverty and comparing achievement across countries and over time.

Mr. Ernesto Hernández-Catá

This paper describes the need to broaden the agenda for poverty reduction. The broadening of the agenda follows from a growing understanding that poverty is more than low income, a lack of education, and poor health. The poor are frequently powerless to influence the social and economic factors that determine their well being. The paper highlights that a broader definition of poverty requires a broader set of actions to fight it and increases the challenge of measuring poverty and comparing achievement across countries and over time.

Mr. Arne L Bigsten
This paper examines dynamic patterns of investment in Cameroon, Ghana, Kenya, Zambia and Zimbabwe, assessing the consistency of those patterns with different adjustment cost structures. Using survey data on manufactured firms, we document the importance of zero investment episodes and lumpy investment. The proportion of firms experiencing large investment spikes is significant in explaining aggregate manufacturing investment. Taken together, evidence from descriptive statistics, average investment regressions modeling the response to capital imbalance, and transition data analysis indicate that irreversibility is an important factor considered by firms when making investment plans. The picture is not unanimous however, and some explanations for the mixed results are proposed.
T. Oyama
This paper examines the general relationship between stock prices and macroeconomic variables in Zimbabwe, using the revised dividend discount model, error-correction model, and multi-factor return-generating model. Despite the large fluctuation in stock prices since 1991, this analysis indicates that the Zimbabwe Stock Exchange has been functioning quite consistently during this period. Whereas sharp increases in stock prices during 1993-94 were mainly due to the shift of risk premium that was caused by the partial capital account liberalization, the recent rapid increase in stock prices can be explained by the movements of monetary aggregates and market interest rates.