Operations, Regulation, and Practices of the Zimbabwe Stock Exchange during the Hyperinflationary Period, 2000–08

This chapter examines the operations, regulation and practices of the Zimbabwe Stock Exchange (ZSE) during the crisis period 2000–08. Why did the ZSE remain vibrant when most other key sectors of the economy declined? The results suggest that the ZSE remained vibrant because ZSE prices managed to beat rising inflation as there were limited alternative legal investments in the economy. This performance, however, did not reflect the real growth of the economy and performance listed companies. The ZSE was largely driven by speculation, inflation developments, and excessive money creation in a declining economy. It mirrored activities in the illegal parallel market for foreign exchange. Fraudulent and irregular trading fuelled inflation. Essentially, in conditions of hyperinflation, declining economic growth, and excessive monetary growth, the stock market can fuel inflation and hurt economic growth. The chapter recommends tight monetary management and dedicated regulation of the stock exchange in a hyperinflationary environment.

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