What question did this study set out to answer?

This research aims to explore how different aspects of financial development affect the sustainability of current accounts in African economies.

January 26, 2026

Dynamic Interactions Between Financial Development and Current Account Sustainability in African Economies

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Research reveals financial development influences current account sustainability in African economies, suggesting structural improvements are needed.

This research aims to explore how different aspects of financial development affect the sustainability of current accounts in African economies.
Used panel data from 2010 to 2023 sourced from World Development Indicators (WDI)
Analyzed multiple financial development variables including credit to the private sector and foreign direct investment
Employed a dynamic panel Generalized Method of Moments (GMM) framework to account for endogeneity
Investigated the impacts of terms of trade and exchange rate dynamics on current account positions.
Found strong persistence in current account balances, indicating structural factors at play
Money supply has a statistically significant positive impact on external sustainability
Credit to the private sector and stock market capitalization show statistically insignificant effects
Foreign direct investment positively influences current accounts depending on alignment with national priorities
Terms of trade and exchange rate changes exhibit weak and inconsistent impacts.

Elumah et al. (2026) studied this question.

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Research reveals financial development influences current account sustainability in African economies, suggesting structural improvements are needed.