Article Review 2.pdf - Article Review Money demand and seignorage maximization before the end of the Zimbabwean dollar Unlike most hyperinflations

Article Review 2.pdf - Article Review Money demand and...

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Article Review: Money demand and seignorage maximization before the end of the Zimbabwean dollar Unlike most hyperinflations, during Zimbabwe’s recent hyperinflation, as in Revolutionary France, the currency ended before the regime. The empirical results here suggest that the Reserve Bank of Zimbabwe operated on the correct side of the inflation tax Laffer curve before abandoning the currency. Estimates of the seignorage maximizing rate derive from a short-run structural vector auto regression framework using monthly parallel market exchange rate data computed from the ratio of prices from 1999 to 2008 for Old Mutual insurance company’s shares, which trade in London and Harare. Dynamic semi-elasticities generated from orthogonalized impulse response functions indicate that the monthly seignorage-maximizing rate equaled 242 to 315 percent, generally exceeding monthly inflation. The behavior of the CPI contrasts with Cavallo’s (2013) observation that the short -term nature of
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