Central Bank Profiteering and Institutional Decline in Zimbabwe (Miller S. M., Ndhela T.)

Central Banks

Abstract As institutions deteriorated during Zimbabwe’s hyperinflation, people accessed official reserves through bribery to complete round-tripping transactions called Bicicletas, which hedge against losses of purchasing power. We model Bicicletas as options that replicate simultaneously exchanging outperforming official foreign reserves for underperforming domestic currency while exchanging back the domestic currency for the foreign currency in the parallel market. Bicicletas are compared to the parallel market premium. Both profit measures rise along with deteriorating institutional quality measured by Clague, et al’s (1999) contract intensive money, but Bicicletas are more informative than the premium because they reflect parallel market and official exchange rate risk.
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Libref/ Miller S. M., Ndhela T. (2011) "Central Bank Profiteering and Institutional Decline in Zimbabwe", pp. 1 - 33
© Программирование — Александр Красильников, 2008
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