Is There a Non-Linear Effect of Commodity Price Volatility on the Financial Stability of Sub-Saharan African Countries?

This paper determines the threshold at which commodity price volatility generates an adverse effect on the stability of the financial sector in Sub-Saharan Africa (SSA). The study is conducted on 24 countries over the period 2002–2021, using a dynamic panel model with threshold effects and the generalised method of moments in difference estimators. Findings reveal that above thresholds of 4.59 for the composite financial stability index and 4.41 for the z-score, commodity price volatility has adverse effects on the financial systems of SSA economies. Moreover, regulation improves countries’ financial stability, while full market openness increases the risk of financial instability