This study aimed to examine the dynamic interactions among exchange rates (EXR), price stability (CPI), and financial flows. We extracted quarterly data for all African countries from 2005 to 2025 for this investigation from the International Monetary Fund (IMF) IFS, the global economy, and the World Bank WDI. Exploratory data analysis (EDA) reveals that the correlations are uniformly low to moderate, with no coefficient exceeding 0.42, indicating the absence of multicollinearity and motivating the use of dynamic Panel Vector Autoregression (PVAR). PVAR results show that CPI and Money Supply (MS) reinforce each other significantly: ΔCPI (−1) = 0.156*, ΔMS (−1) = 0.484***; ΔMS (−1) = 0.078*** in the MS equation. GDP growth (GDPG) is highly persistent GDPG (−1) = 0.484***, Interest rates (IR) show strong own-dynamic IR IR (−1) = 0.939***, while EXR changes remain statistically unaffected by past macro-financial shocks. The study reveals that CPI and financial flows are tightly linked, but exchange-rate movements do not play a significant role in transmitting macro-financial shocks. The substantial, statistically significant feedback between CPI and MS indicates that monetary expansion is a key driver of CPI. Also, EXR-based stabilization may have limited short-run effectiveness within the estimated system. This study provides new empirical evidence that, contrary to prevailing assumptions, EXR movements exhibit weak dynamic interactions with key macro-financial variables, while CPI and MS dominate the short-run macroeconomic transmission mechanism. This provides policymakers with a better understanding of the contributions of each determinant to both the EXR and CPI dependent variables.
Malope et al. (Thu,) studied this question.