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The Role of Financial Development and Government Size in Moderating the Effect of Global Uncertainty on International Trade in Africa

Author

Listed:
  • Oliver E. Ogbonna
  • Mulatu F. Zerihun

    (Tshwane University of Technology, Pretoria, South Africa)

Abstract

This study explores how policy uncertainty affects exports and imports and how financial development and government size moderate the effect. Using the GMM method, the study analyses data from 38 African countries spanning 2010–2022. Key findings show that (i) world uncertainty reduces the exports and imports; (ii) the effect of internal uncertainty is more pronounced on exports, while external uncertainty has a greater impact on imports; (iii) financial development does not have the capacity to attenuate the negative effects of world uncertainty on international trade; and (iv) under the influence of world uncertainty, government size plays a countercyclical role.

Suggested Citation

  • Oliver E. Ogbonna & Mulatu F. Zerihun, 2025. "The Role of Financial Development and Government Size in Moderating the Effect of Global Uncertainty on International Trade in Africa," The African Finance Journal, Africagrowth Institute, vol. 27(1), pages 13-31.
    • Handle: RePEc:afj:journl:v:27:y:2025:i:1:p:13-31
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-finj_v27_n1_a2
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    More about this item

    Keywords

    International Trade; Policy Uncertainty; Financial Development; Government Size; System GMM;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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