Exchange Rate Volatility, Global Currency Fragmentation, and Supply Chain Financing: Evidence from European and African Firms

Global supply chains increasingly depend on financial mechanisms that support liquidity and trade credit across borders, yet macro-financial instability may disrupt these arrangements. This study investigates how exchange rate volatility, cross-border credit availability, and global currency fragmentation influence supply chain financing among European and African firms, while examining the moderating role of domestic credit to the private sector. Using a balanced panel of 40 firms from 2010–2024 (600 firm-year observations), the study applies a multi-method empirical strategy combining two-way fixed effects, dynamic System-GMM estimation, and panel quantile regression to capture static, dynamic, and heterogeneous effects. Machine learning validation using Extreme Gradient Boosting (XGBoost) with SHAP analysis further assesses nonlinear relationships and predictive relevance of the explanatory variables. The econometric results indicate that exchange rate volatility and global currency fragmentation significantly reduce firms’ reliance on supply chain financing, whereas cross-border credit availability enhances trade credit financing within global production networks. Domestic financial development mitigates the adverse impact of exchange rate volatility, highlighting the stabilising role of strong banking systems. Quantile regression reveals heterogeneous effects across firms with different levels of supply chain financing. The machine learning validation confirms the predictive importance of macro-financial variables. The study contributes novel evidence by integrating macro-financial risks, firm characteristics, and machine learning validation within a unified framework, offering policy insights for strengthening financial resilience in global supply chains.