The purpose of this study is to determine the causes of hyperinflation in Zimbabwe for
the period February 1999 to December 2006 using appropriate econometric techniques.
Results from long run and shot run econometric models shows money supply, black
market for foreign exchange (US$) and lagged values of hyperinflation to be positively
correlated with the country’s hyperinflation trend. This result accords well with the
various theories of hyperinflation. Surprisingly, political rights index as a determinant is
negatively associated with hyperinflation, suggesting that an increase in this variable
reduces hyperinflation. This is against economic theory, which expects a positive sign for
this, variable. Granger causality test is also conducted between money supply and
hyperinflation to empirically test the direction of causality, while sensitivity tests are done to infer the effect of money supply shock on hyperinflation trend.