Impacts of Macroeconomic Policies on Nutrition Outcomes: The Case of Fiscal, Monetary, Trade and Exchange Rate Policies in Zimbabwe

Abstract

This study investigates the dynamic impacts of macroeconomic policies on child and maternal nutrition outcomes in Zimbabwe. Utilizing an unrestricted Vector Autoregression (VAR) framework on annual secondary data spanning 1990 to 2020, we model the transmission pathways of fiscal, monetary, trade, and exchange rate policies. In this framework, Total Public Social and Agricultural Expenditure (TAE) proxies fiscal policy; the average interest rate on borrowed funds by individuals (IR) represents monetary policy; trade openness (TO) and food imports or imports of consumables (FIMP) capture trade policy; and the official exchange rate (EXR) represents exchange rate policy. Three nutrition outcomes were considered which are; the percentage of stunted children (Stunt), percentage of low birth weight babies(LBW) and underweight children below the age of 5(UW). The findings were that there exists causality between Stunt and trade openness (TO), with a unidirectional relationship running from Stunt to trade openness. There is also a uni-directional relationship between low birth weight (LBW) and Total Public Social and Agricultural Expenditure (TAE) by government, where TAE granger cause LBW. Variance decomposition and impulse response functions demonstrate that while nutritional outcomes are predominantly driven by their own historical trajectories (shocks), macroeconomic variables, particularly exchange rate and interest rates exert substantial, long-lasting impacts on nutrition security. Given that exchange rate explain the variation in nutrition outcomes both in the short and long run, we recommend strict exchange rate and monetary stabilization mechanisms as a prerequisite for safeguarding household purchasing power, public health sovereignty and nutrition status of the entire population both in the short term and long term.