Linking Debt Sustainability, Green Infrastructure Innovation, Exchange Rate Volatility, and Output Growth in Sub-Saharan Africa

This study investigates the intertwined effects of debt sustainability, green infrastructure innovation, and exchange rate volatility on output growth in Sub-Saharan Africa (SSA), using annual data from 48 countries spanning 2005 to 2024. A two-stage methodological approach was employed: The System Generalized Method of Moments (GMM) was used for baseline estimation, while the Threshold Non-Linear ARDL (TNARDL) model provided robustness checks and captured regime-dependent dynamics. The findings reveal that output growth in SSA is heavily influenced by past performance (growth inertia), macroeconomic structures, and institutional quality. Moderate debt levels, when channeled into productive investments, promote short-term growth, but persistent fiscal deficits and rising debt burdens diminish long-term performance—underscoring the need for prudent debt management and transparent fiscal policies. Green infrastructure, particularly renewable energy investments, offers substantial long-run growth benefits, despite initial trade-offs. CO₂-intensive activities may yield temporary gains but ultimately undermine sustainable development. Exchange rate management presents a dual challenge: while real effective exchange rate adjustments can boost competitiveness in the short run, volatility and speculative pressures, such as those experienced in Nigeria significantly hinder long-term growth prospects. The TNARDL results emphasize the importance of context: fragile economies benefit greatly from marginal reforms, while more advanced or resource-rich countries must focus on institutional efficiency to sustain output expansion. Additionally, institutional weaknesses, manifested through ineffective financial systems, poor regulation, and weak governance act as structural barriers to inclusive growth. The study concludes by advocating for integrated, context-sensitive policy frameworks that combine fiscal discipline, green investment, monetary stability, and institutional reform to drive resilient and inclusive economic development across the SSA region.