World De-Dollarisation: Economic Implication of De-Dollarisation in Zimbabwe (Introduction of Special Coins)

Abstract

Many economies have a significant amount of foreign currency in their monetary systems. The presence of foreign currency implies a certain level of dollarization. Dollarization denotes the use of a foreign currency in any of its three functions: unit of account, means of exchange and, in particular, store of value. Initial stages of dollarisation brings in stability in the economy, but in the long-run institutional factors underpin growth and stability. This paper is based on empirical analysis and seeks to explore the economic impact of premature de-dollarisation in Zimbabwe. The issue of introducing special coins in Zimbabwe has raised concerns among policy makers and general public, and this papers seeks to shed light by discussing the economic meaning of introducing special coins and the associated benefits and costs. Furthermore the paper discusses the strengths and challenges brought about through dollarisation. The world currency reforms in current debate are outlined and synthesized by the study. The study concludes by suggesting appropriate stages to be followed in currency reforms to avoid a double-deep economic downfall.