Impact of exchange volatility on private- sector credit access in sub-Saharan African

This study investigates the impact of exchange rate volatility on private sector credit supply in Sub-Saharan Africa (SSA). Employing a two-step System Generalized Method of Moments (GMM) estimator on an unbalanced panel spanning 2003–2021, the analysis addresses endogeneity concerns and dynamic panel biases. The results reveal that exchange rate volatility significantly and negatively affects domestic credit to the private sector. This finding underscores the destabilizing role of exchange rate volatility, as heightened volatility amplifies uncertainty and risk, prompting financial institutions to adopt more conservative lending strategies. In conclusion, expanding private sector credit supply in the context of high exchange rate volatility necessitates a combination of sound macroeconomic management, targeted structural reforms, and institutional strengthening to foster a resilient financial system.