currency area was less than the number of countries, then which countries should form
currency unions? The theory of optimum currency areas has its roots in the merits and
demerits of fixed and flexible exchange rates. In this regard, the optimal currency area
becomes one which facilitates sustainable benefits from increased international trade, low
inflation and the correlation of business cycles. In this regard, Zimbabwe though dollarization
becomes integrated with the United States of America thus forming an optimal currency area.
Hayek (1976) addressed the issue from the perspective of liberty and argued that inflation
can be halted through competition in currency. Economic agents should be at liberty to select
any currency they desire. This acknowledgement of property rights inherent in currency
would compel governments, politicians and central banks to limit their quantities. Thereby
preserving their monetary values. This research is relevant to Zimbabwe in that economic
agents chose not to continue accepting the Zimbabwe dollar and exercised their property
rights in currency.
Some politicians and researchers concur that dollarization leads to many benefits for the
entirety of the economy such as stability. However, others such as Cheng and Wang, (2011)
contend that dollarization is a form of neo-colonialism. While Qusipe and Whisler, (2006)
find that dollarisation increases exports, balances the trade deficit, increases foreign direct
investment, and witnesses’ growth in gross domestic product. Although, currency may be
politicised by these researchers, an employee watching the value of his earnings disappear
through hyperinflation is least concerned about neo-colonialism but more concerned about his
own well -being and the escape from poverty.
In a study by Enriquez (2010) on Cuba, the researcher contends that tourism has a role to
play in economic development and growth. Furthermore, the researcher highlights the
participation of foreign businesses and foreign direct investment as crucial to the Cuban
tourism recovery. Moreover, this strategy led to a 400 per cent growth in export earnings.
Keeley and Kess (2013) concurs and cites the case of Ecuador that after dollarization in 2001
foreign direct investment spiked from negative 23million the year before to in excess of 271
million U.S. dollars in 2006.
These studies are relevant for Zimbabwe as it struggles to build its economy after a
decade of negative growth and deindustrilisation. Tourism offers the best and quickest
opportunity for rapid growth. In the view of the World Bank 2009) tourism is an industry
which has great potential to alleviate poverty. Secondly, tourism is an industry which is
characterised by low barriers to entry, a periodic flood of visitors, uncomplicated products,
and utilisation at the source of production. To this end it is becoming an increasingly
important driver of growth in several Sub-Saharan African countries. Accordingly, tourist