An Independent Review of The Reserve Bank of Zimbabwe’s Monetary Policy Transparency

Abstract

The purpose of this paper is to conduct an independent review of the Reserve Bank of Zimbabwe’s monetary policy in the context of monetary policy transparency, through comparing the results with other central banks in order to draw conclusions regarding the monetary policy of the Reserve Bank of Zimbabwe. Monetary policy transparency is essential in anchoring inflationary expectations. This paper employs Eijffinger and Geraats (2006)’s ‘independent analysis approach’ to measure monetary transparency of the Reserve Bank of Zimbabwe. The results indicate that the Reserve Bank of Zimbabwe scores 2.5 out of 15 a score which is lower than any of the central banks’ score in Eijffinger and Geraats (2006), Malik and Din (2008) and Aron and Muellbauer (2006) studies. The Reserve Bank of Zimbabwe is the least transparent in political and procedural transparency, while it is partially transparent on economic matters. It is relatively more transparent on policy and operational issues. In comparison with other central banks, the Reserve Bank of Zimbabwe is only above par with regard to policy transparency only against Pakistan, but is below par against all other countries regarding political, economic, procedural and operational transparency.

Keywords: Monetary policy transparency, Reserve Bank of Zimbabwe,
developing countries