Standard studies on the relationship between broad money, exchange rate (FX), interest rate, and inflation showed a spectrum of varying results. The first strand of research documented a positive causal relationship where broad money and the exchange rate directly stimulate inflation by increasing purchasing power and aggregate demand. The second reported a negative association where broad money and exchange rate were harmful to inflation because the wide money and exchange diverted resources leading to more productive government spending. The third showed a sequential causal relationship indicating an impact of broad money on exchange rate causing an increase on inflation and subsequently leading to an increase in money abroad and exchange rate, while the fourth strand indicated a two-way causal relationship between broad money, exchange rate and inflation.

This study investigates the impact of broad money, exchange rate, and interest rate on inflation in Egypt, Nigeria and South Africa since they showed the highest levels of gross domestic product (GDP) among African countries during the research period of interest. These countries experienced a negative relationship between real interest rate and inflation where increased rates of real interest led to inflation rates decrease.

The results of the standard model showed a positive correlation between broad money, exchange rate and inflation in Egypt, Nigeria and South Africa.