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1. Towards An Inflation Targeting Regime in Zambia

Author:
Caesar Cheelo and Thulani Banda
Publication Date:
06-2017
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
In this paper, I seek to discuss the conduct of monetary policy in an inflation targeting framework. The objective is to understand structural and institutional nuances in settings where this framework is successful in controlling inflation and challenges that emerge in the implementation of inflation targeting. I deal with the question: which institutional conditions should exist to support the successful implementation of inflation targeting in countries that use it? I find several institutional and legal elements which are common and can potentially explain much of the success in the implementation of inflation targeting among their monetary authorities. I benchmark these elements with the concepts of transparency and accountability of the central bank which are central tenets in the discussion of inflation targeting. I note that central bank credibility is a key outstanding element in explaining the success of inflation targeting. Components such as central bank independence and commitment to low stable inflation as the overriding objective of monetary policy represent critical preconditions for inflation targeting and can sustain the credibility of monetary policy.
Topic:
Monetary Policy, Inflation, Central Bank, Transparency, and Financial Institutions
Political Geography:
Africa and Zambia

2. A Tightening Balancing Act: Economic Implications of Zambia's Balance of Payments Performance

Author:
Caesar Cheelo and Thulani Banda
Publication Date:
06-2017
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
International trade and investment are primary drivers of globalization, international trade and development. In 2014, Zambia’s trade openness – in terms of total monetary flows on all export and import transactions combined – was estimated at 79.6% of GDP while the total (cumulative) stock on inward FDI was 66.5% of GDP. The recent economic headwinds in Zambia and abroad motivated this review of the country’s external position relative to the rest of the world. This paper highlights the changes in the balance of payments (BOP), a key tool for monitoring Zambia’s economic performance vis-à-vis the rest of the world. The balance of payments shows the Zambia’s financial transactions with other countries in the world, recoding the flows of money into and out of the economy through a number of payments accounts. Checking the economy’s balance of payments position offers useful insights about its external sector’s health. In a sense, the monetary flows through the balance of payments reflect Zambia’s net dependency on the rest of the world. The context of the analysis in the paper is the economic malaise of 2015. The paper thus demonstrates that the economic debacle of 2015 is not an unfamiliar experience for Zambia. It draws on the country’s economic recent history, identifying parallels between the past and the present. It seeks to offer guidance to policy-makers, towards fostering foster effective and reliable responses to the external balance challenges. Particularly, the paper analyses the fundamental elements of Zambia’s balance of payments, describing their recent behaviour and highlighting some of the main drivers of imbalances in the different payments accounts. It recommends measures for correcting some of the imbalance in the balance of payments, seeking to contribute to the improvement of the external sector’s performance.
Topic:
Economics, International Trade and Finance, and Trade
Political Geography:
Africa and Zambia

3. Second-Hand Motor Vehicle Imports in Zambia: Juicing from Lemons?

Author:
Thulani Banda and Zali Chikuba
Publication Date:
12-2014
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The sustained positive growth of the Zambian economy has resulted in many shifts in consumption patterns of Zambian households. One notable change is the increased consumption of consumer durables, particularly motor vehicles. Motor vehicle ownership has increased substantially since 2004. The increase in motor vehicle ownership owes in part to the highly unbridled access to second hand motor vehicle imports. The downside of the relaxed motor vehicle import regulations as observed in Zambia is the ageing of the motor vehicle fleet and deterioration in fleet safety. Second hand motor vehicles imported in the country may be fine, but they may also be unreliable – commonly referred to as lemons in economic literature – and costly to maintain thereby generating serious financial, road safety and environmental concerns. Considering that Zambia is one of the highest road fatality risk countries in Africa with 23.7 road traffic deaths per 100,000 people, the ageing fleet of motor vehicles only compounds the risk. Thus, more deliberate measures to ensure lives are safeguarded and consumers get value-for-money on motor vehicle imports should be devised and implemented urgently.
Topic:
Regulation, Economy, Imports, and Motor Vehicles
Political Geography:
Africa and Zambia