Is The Quantitative Easing By The RBZ Leading Zimbabwe Back To 2008 Hyperinflation Period?

By Clemence Mupfunya As predicted by the quantity theory of money, the hyperinflation period of 2008 was linked to the central bank of Zimbabwe through the use of quantitative easing mothed by increasing money supply. Quantitative easing is a monetary policy strategy used by central banks like RBZ. A central bank purchase securities in an attempt to reduce interest rates, increase the supply of money and drive more lending to consumers and businesses. The goal is to stimulate economic activity during a financial crisis and keep credit flowing. When a central bank decides to use quantitative easing monetary tool, it makes large-scale purchase of financial assets, like government and corporate bonds and even stocks. This relatively simple decision triggers powerful outcomes. The amount of money circulating in an economy increases, which helps lower long-term interest rates. This lowers the cost of borrowing which spurs economic growth. The government through the reserve bank (RBZ) increases money supply in order to respond to aggrandising national debt.