This study assesses the optimal threshold at which financial development affects international trade in Sub-Saharan Africa. The study utilised the dynamic threshold technique developed by Seo et al. (Stata J 19(3):685-697, 2019) on annual panel data spanning 1980 to 2022 for 38 SSA countries. The study revealed that trade intensity is expected to increase by 1.416% significantly before financial development exceeds the threshold of 0.092% within the region. Also, trade volume is expected to improve by 0.743% if financial development surpasses the threshold of 0.081%. This implies that that trade intensity will increase significantly as financial development grows, but only until it reaches a threshold of 0.092%, after which the effect may taper off. Similarly, trade volume is expected to improve if financial development surpasses a threshold of 0.081%, highlighting the importance of carefully calibrated financial policies to maximize both trade intensity and volume within the region. Therefore, the study recommends that policymakers in sub-Saharan Africa focus on improving financial inclusion and infrastructure to enhance trade intensity and volume while diversifying trade partnerships to reduce dependency on limited markets. Additionally, long-term strategies should address the risks of excessive financialization through regulatory frameworks to ensure financial development continues to positively impact trade without causing economic instability.
Danquah et al. (2026) studied this question.