The role of economic stability in boosting exports in COMESA: Threshold effects analysis

Economic stability is crucial for improving export performance, particularly within regional trade blocs such as the Common Market for Eastern and Southern Africa (COMESA). However, empirical studies examining how threshold levels of economic stability affect export dynamics among COMESA member states have been limited. This study explores the threshold effects of key economic indicators, economic growth, trade openness, and inflation, on export performance in COMESA countries using panel data from 2000 to 2022. Employing panel threshold regression analysis, this study investigates the nonlinear relationships between these variables, focusing particularly on the impact of inflation thresholds. The study found an optimal inflation threshold of 3.662%, aligning with the lower end of the global benchmark of 3-7% typically observed in emerging and developing economies. In low-inflation regimes (LnInfl ≤ 3.662), GDP significantly enhances export growth by 0.348% per unit increase, while trade openness yields a smaller contribution of 0.091%. In contrast, high-inflation scenarios (LnInfl > 3.662) show that GDP continues to support exports (0.779% increase), but trade openness negatively impacts export performance by 0.127%. Policymakers need to focus on maintaining inflation under the critical threshold of 3.662%, as this is vital for enhancing the benefits of GDP growth and trade openness on export performance. These insights underscore the necessity of keeping inflation in check to improve export competitiveness. Additionally, prioritizing monetary, fiscal, and institutional stability initiatives will support sustainable growth and strengthen regional trade dynamics within COMESA, as exceeding this inflation limit could impede export potential and regional integration efforts. This study offers valuable insights for developing regions aiming to enhance their trade performance through effective economic policies.