Capital mobility and trade performance in sub-Sahara African countries

This paper examines the nexus between capital mobility and trade performance in 30 sub-Saharan African (SSA) countries from 2000 to 2022. Capital mobility is measured using the de jure KOF Financial Globalisation Index and de facto indicators (FDI, ODA, and remittances). Employing the Panel Corrected Standard Error (PCSE) model to address heteroscedasticity, autocorrelation, and cross-sectional dependence, the study finds that financial globalisation and foreign direct investment (FDI) significantly improve trade performance, suggesting that capital mobility fosters trade. In contrast, Official Development Assistance (ODA) and remittances exhibit significant negative effects. Robustness checks using the two-step System Generalised Method of Moments (GMM) confirm the persistence of trade performance and support the core findings. The study underscores the need for policies that promote FDI and calls for a reassessment of aid and remittance utilisation strategies in the region.