ASYMMETRIC EFFECTS OF FINANCIAL DEVELOPMENT ON INTERNATIONAL TRADE IN AFRICA: A PANEL NONLINEAR ARDL–PMG APPROACH

This study investigates the relationship between financial development and international trade in Africa by analyzing panel data covering 39 economies over the period 1990–2021. For this, a methodology combining panel linear and nonlinear Autoregressive Distributive Lag (ARDL) models was employed, using the Pooled Mean Group (PMG) estimator to capture both symmetric and asymmetric effects of financial development on trade openness, exports, and imports. Additionally, to enhance the analysis, a comparative approach was adopted by dividing the panel into three levels of financial development. The linear analysis reveals a negligible short-term impact, whereas in the long run, financial development exhibits a negative effect on exports and a positive effect on imports. Furthermore, the nonlinear findings highlight the asymmetry of long-run financial development effects while enriching the analysis by identifying positive short-run effects exerted by positive shocks. Group analysis underscores these observations and provides a better understanding of the distribution of these effects. Findings indicate that economies with an intermediate level of financial development are showing exclusively positive effects in the short run and negative effects in the long run. On the other hand, high- and low-level economies are only affected in the long run by upward shocks that stimulate their exports and imports, respectively.