Financial sector development and intra-African trade

Lewis L. Gakpa, Issouf Soumaré, Hugues K. Kouadio and Charles K.D. Adjasi

Journal of International Financial Markets, Institutions and Money, 2025, vol. 102, issue C

Abstract: This paper examines the nature of the relationship between Financial Sector Development (FSD) and intra-African trade. Using a sample of African countries with available data from 1998 to 2021, and robust estimation techniques that address endogeneity and omitted variables biases, we find a positive significant impact of the composite financial development indicator and cross-border banking flows on intra-African trade. Further analysis reveals that the effects of the financial institution sub-indicators are more pronounced than those of the financial market sub-indicators. The effects are also heterogeneous across the different African Regional Economic Communities (RECs). Finally, our results show that financial sector development affects intra-African trade indirectly through its impact on the services and industrial sectors.

Keywords: Financial development; Intra-African trade; Gravity model (search for similar items in EconPapers)
JEL-codes: F14 G1 G2 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:102:y:2025:i:c:s1042443125000666

DOI: 10.1016/j.intfin.2025.102176

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