Food Inflation and Food CPI in Malawi: Do Exchange Rates and Macroeconomic Factors

Abstract Food price volatility remains one of the most pressing macroeconomic and welfare challenges in low-income economies, particularly in Sub-Saharan Africa where households allocate a disproportionately large share of income to food consumption. In Malawi, persistent food price instability reflects a complex interplay of structural vulnerabilities, external shocks, and macroeconomic dynamics. This study examines the extent to which exchange rate fluctuations and key macroeconomic variables drive food inflation and food consumer prices using monthly data from 2013 to 2017. Adopting an Autoregressive Distributed Lag (ARDL) modelling framework, the analysis captures both short-run adjustments and long-run equilibrium relationships between food inflation, exchange rate movements, and macroeconomic fundamentals. The results provide strong evidence of exchange rate pass-through effects, whereby currency depreciation significantly increases food prices through higher import costs of agricultural inputs such as fertilizer and fuel. While long-run relationships between food prices and macroeconomic variables are confirmed, short-run dynamics are predominantly driven by exchange rate volatility and monetary conditions, particularly lending rates. The findings further reveal that food inflation in Malawi is not merely a reflection of agricultural supply shocks but is deeply embedded in macroeconomic instability and structural dependence on imports. This underscores the need for integrated policy responses that combine exchange rate stabilization, agricultural transformation, and institutional coordination. The study contributes to the limited empirical literature on food inflation in small, import-dependent economies and offers policy-relevant insights for strengthening food security and economic resilience. JEL Classifications: 031; F31; Q; 18; C32