Analysis reveals public debt negatively affects trade in Sub-Saharan Africa, indicating the need for regional cooperation and better debt management strategies.
This study critically examines the threshold effects of exchange rate dynamics on the influence of public debt on international trade across Sub-Saharan Africa (SSA). Utilising the System Generalised Method of Moments (SGMM) alongside dynamic threshold estimation on panel data spanning 2000–2023, the analysis uncovers the relationships between external, domestic and total public debts and trade performance. The findings demonstrate that all categories of public debt exert a significant negative influence on trade, with total public debt imposing the most pronounced constraint. Importantly, exchange rate depreciation emerges as a critical catalyst, intensifying the adverse trade effects of public debt. The study identifies precise exchange rate thresholds at which external, domestic, and total debts begin to significantly hinder trade flows. These insights reveal the imperative for SSA policymakers to adopt integrated approaches encompassing sustainable debt management, exchange rate stabilisation through robust monetary frameworks, enhanced domestic revenue mobilisation and strengthened regional cooperation to mitigate debt vulnerabilities and catalyse resilient trade growth.
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Danquah et al. (2025) studied this question.
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