Volume 26 • Issue 1 • Year 2026
Applied Econometrics and International Development
Research Article

Macroeconomic Interactions, Inflation, and Exchange Rate Behaviour: A Structural Mediation Analysis

Pages: 30-40

Authors

Respect Kudzai Mauto1,*, Sibanisezwe Khumalo1 Tafirenyika Sunde2 Sambulo Malumisa3 Junious Marire4

Author Affiliations

  • 1Rhodes University, Republic of South Africa
  • 2Namibia University of Science and Technology, Namibia & North - West University
  • 3Rhodes University, Republic of South Africa
  • 4University of Birmingham Dubai City Campus Rhodes University, Republic of South Africa

DOI

https://doi.org/10.64067/2660-7409.26.i1.04

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Abstract

This study investigates whether inflation mediates the relationship between a composite macroeconomic interaction index comprising money supply, interest rates and GDP growth (the MIG index) and exchange rate dynamics in Zimbabwe, Zambia, South Africa, Namibia and Botswana. Using balanced annual panel data for 2010–2024 and a Structural Equation Modelling (SEM) mediation framework, the study finds that the MIG index is positively associated with inflation (coefficient = 42.046; p = 0.027) and exchange rates (coefficient = 0.332; p = 0.039), while inflation is positively associated with exchange rates (coefficient = 47.954; p = 0.008). Standardized robustness estimates confirm a statistically meaningful indirect effect of 0.140, with a bootstrapped 95% confidence interval of [0.012, 0.310]. The evidence supports partial mediation: monetary and real-sector conditions affect exchange rates directly and indirectly through domestic price pres sures. Because exchange rates and inflation are jointly determined in macroeconomic systems, the results are interpreted as structural asso ciation and mediation evidence rather than definitive proof of causality. The findings imply that exchange-rate management in Southern Africa requires coordinated attention to inflation, money supply, interest-rate settings and growth conditions.

Keywords

  • Mediation
  • Inflation
  • Money Supply
  • Interest Rate
  • GDP

JEL Classifications

  • E3, E4, and E5.

How to Cite

Respect Kudzai Mauto, Sibanisezwe Khumalo, Tafirenyika Sunde, Sambulo Malumisa and Junious Marire. (2026). Macroeconomic Interactions, Inflation, and Exchange Rate Behaviour: A Structural Mediation Analysis. Applied Econometrics and International Development, 26(1), 31-40. https://doi.org/10.64067/2660-7409.26.i1.04

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Applied Econometrics and International Development

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Respect Kudzai Mauto*
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© 2026 Respect Kudzai Maut et al.
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This is an open-access article published in Applied Econometrics and International Development and distributed under the terms of the Creative Commons Attribution License (CC BY 4.0). This license permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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