The Current Zimbabwean Liquidity Crisis: A Review of its Precipitates

  • Banele Dlamini Lupane State University
  • Leonard Mbira Lupane State University
Keywords: Liquidity crisis, risk, Monetary and financial policy, Zimbabwe

Abstract

The liquidity crisis has beleaguered banks and has been bedeviling companies since 2009, after the introduction of the multi-currency system which has affected the Zimbabwean economic development. This research paper aims at investigating the causes of the liquidity crisis faced in the Zimbabwean economy. The study used survey design and researcher administered questionnaires in collecting data from the respondents located in Harare, Bulawayo, Gweru and Masvingo. Out of the 200 questionnaires issued, 150 were successfully completed and returned resulting in a response rate of 75%. The study also used secondary data obtained from government agencies on export and import performance. SPSS AMOS was used to test the hypothesis raised and generate a path model determining the size and strength of the direct and indirect influence between the predictor variables and the downstream variable. The study identifies the following antecedents of liquidity crisis; public and investor confidence, country risk, and externalization of funds, illicit financial flows, and net export performance as significant drivers that have an effect on the current liquidity crisis. The results showed that the absence of the lender of last resort role by the central bank has no significant contribution to the liquidity crisis currently obtaining. It is recommended that the government focuses on the aforementioned antecedents in order to address the liquidity crisis.

Downloads

Download data is not yet available.

References

Amihud, Y., Mendelson, H. & Pedersen, L. H. (2012). Market Liquidity Asset Pricing, Risk, and Crisis. Cambridge: Cambridge University Press.
Berrospide, J. (2013). Bank Liquidity Hoarding and the Financial Crisis: An Empirical Evaluation (Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affair No. 2013–3). Washington, D.C.
Borio, C. & Drehmann, M. (2009). Assessing the Risk of Banking Crises – Revisited. BIS Quarterly Review, 3, 29–46. Retrieved from http://www.bis.org/publ/qtrpdf/r_qt0903e.pdf.
Brunnermeier, M. K. (2009). Deciphering the Liquidity and Credit Crunch 2007–2008. Journal of Economic Perspectives, 23(1), 77–100. https://doi.org/10.1257/jep.23.1.77.
Chagwiza, W. (2013). Liquidity Derivatives as Solution to Zimbabwean Economic Liquidity Problems. Global Advanced Research Journal of Economics, Accounting and Finance, 2(3), 67–72.
Chikoko, L. (2014). Potential Sources of Zimbabwe Banks Illiquidity After Dollarisation. Journal of Contemporary Issues in Business Research, 3(1), 41–51.
Chikoko, L. & Pierre, L. R. (2012). Zimbabwe Commercial Banks Liquidity Management in the Hyperinflation Environment. African Journal of Business Management, 6(48), 11787–11796. https://doi.org/10.5897/AJBM12.1314.
Clemens, B. M. & Moss, T. (2005). Costs and Causes of Zimbabwe ’ s Crisis. Center for Global Development, (July 2005).
Dube, H. & Matanda, E. (2015). The Downfall of the Micro Lending Businesses in Zimbabwe: Causes and Remedies. International Review of Research in Emerging Markets and the Global Economy (IRREM) An Online International Research Journal, 1(4), 2311–3200. Retrieved from www.globalbizresearch.org.
Dullien, S., Davies, R., Huizenga, C., Kotte, D. J., Cintra, M., Peates, D. & Zattler, J. (2010). The Financial and Economic Crisis of 2008-2009 and Developping Countries. (S. Dullien, D. J. Kotte, A. Marquez, & J. Priewe, Eds.), United Nations Conference on Trade and Development and Hochschule fur Technik und wWrtschaft Berlin. UNCTAD. Retrieved from http://unctad.org/en/Docs/gdsmdp20101_en.pdf.
Dzingirai, C. (2014). Determinants of Bank Failures in Multiple-Currency Regime in Zimbabwe (2009–2012). International Journal of Economics and Finance, 6(8), 229–246. https://doi.org/10.5539/ijef.v6n8p229.
International Monetary Fund. (2016). Staff Report for the 2016 Article IV Consultation. IMF Country Report No.16/110, (16). https://doi.org/1AGOEA2015002.
Kairiza, T. (2009). Unbundling Zimbabwe’s Journey to Hyperinflation and Official Dollarization (GRIPS Policy Information Center No. 9–12). Tokyo. Retrieved from www.grips.ac.jp/r-center/wp-content/uploads/09-12.pdf.
Kararach, G., Kadenge, P. & Guvheya, G. (2010). Currency Reforms in Zimbabwe: An Analysis of Possible Currency Regimes (10). African Capacity Building Foundations. TheAfricanCapacityBuildingFoundation.
Kramarenko, V., Engstrom, L., Verdier, G., Fernandez, G., Oppers, S. E., Hughes, R. & Coats, W. (2010). Zimbabwe: Challenges and Policy Options after Hyperinflation. International Monetary Fund (10th–3rd ed.). Washington, D.C.: International Monetary Fund. Retrieved from http://www.abaz.co.zw/pdf/International Monetary Fund/Zimbabwe - Challenges and Policy Options after Hyperinflation.pdf.
Laeven, L., Valencia, F., Cerutti, E., Claessens, S., Cortavarria-Checkley, L., Dohlman, P. & Wiegand, J. (2012). Resolution of Banking Crises: The Good, the Bad, and the Ugly, (August). https://doi.org/10.5089/9781455201297.001.
Mabvure, J., Gwangwava, E., Faitira, F., Clifford, M. & Michael, K. (2012). Non Performing loans in Commercial Banks : A case of CBZ Bank Limited In Zimbabwe. Interdiscriplinary Journal of Contemporary Research in Business, 4(7), 467–488.
Makina, D. (2009). Recovery of the Financial Sector and Building Financial Inclusiveness (Comprehensive Economic Recovery in Zimbabwe). UNDPs Comprehensive Economic Recovery in Zimbabwe Working Paper Series (Vol. 5).
Mambondiani, B. L., Zhang, Y. & Arun, T. (2014). Corporate Governance and Bank Performance : Evidence from Zimbabwe, 1–32.
Mangudya, J. (2016). Press Statement Measures to Deal with Cash Shortages whilst Simultaneously Stabilising and Stimulating. Harare: Reserve Bank of Zimbabwe.
Mashakada, T. (2016a). Alternative solutions to the liquidity, cash crisis - The Zimbabwe Independent. Zimbabwe Independent. Retrieved from http.
Mashakada, T. (2016b). The liquidity-cum-cash challenges in Zimbabwe A fiscal policy crisis. A Voice for the Voiceless. Retrieved from http/www.
Mudzingiri, C. (2013). The Impact and Lessons of the 2008 Global Financial Crisis to Zimbabwe. Dubai: International Business and Social Sciences Research. https://doi.org/10.5901/mjss.2014.v5n27p333.
Muneer, S. & Rehman, S. U. (2012). Materialization of Behavioral Finance and Behavioral Portfolio Theory: A Brief Review. Journal of Economics and Behavioral Studies, 4(8), 431-435
Munzara, A. T. (2015). Escaping Deflation In Zimbabwe: The Role Of Fiscal And Monetary Policies. IOSR Journal of Economics and Finance, 6(6), 23–25. https://doi.org/10.9790/5933-06612325.
Mzumara, M. (2012). An Overview of Zimbabwe ’ S Macroeconomic Environment. International Journal of Economic Research, 3(1), 33–69.
Ngwenya, B. & Chiwawa, D. (2016). Impact of liquidity crisis on bank ’ s response towards corporate social responsibility : A Case Study of Commercial Bank of Zimbabwe ( CBZ ) Ltd Harare period ( 2009-2014 ). International Journal of Research and Reports, 2(2), 55–64.
Nhavira, J. D. G., Mugocha, E. & Mudzonga, E. (2013). Financial Regulation and Supervision in Zimbabwe : An Evaluation of Adequacy and Options. Financial Regulation and Supervision in Zimbabwe. Harare: Zimbabwe Economic Policy Analysis and Research Unit. Retrieved from http://elibrary.acbfpact.org/acbf/collect/acbf/index/assoc/HASH3ed8.dir/Financial Regulation.pdf.
Reserve Bank of Zimbabwe. (2016). Monetary policy statement: 2016. zimbabwe. Retrieved from http://www.rbz.co.zw/assets/monetary-policy-statement-january-2016.pdf.
Tambudzai, Z. & Charumbira, M. (n.d.). Cash Shortages in Zimbabwe : Any Prospect for Solutions ? The Dyke, 0(1), 22–31.
Wuensch, K. L. (2016). Conducting a Path Analysis With SPSS / AMOS. Retrieved from core.ecu.edu/psyc/wuenschk/MV/SEM/Path-SPSS-AMOS.pdf.
Published
2017-07-20
How to Cite
Dlamini, B., & Mbira, L. (2017). The Current Zimbabwean Liquidity Crisis: A Review of its Precipitates. Journal of Economics and Behavioral Studies, 9(3(J), 212-219. https://doi.org/10.22610/jebs.v9i3(J).1760
Section
Research Paper