How financially integrated are trading blocs in Africa?

Lumengo Bonga-Bonga and Queen Magadi Mabe

The Quarterly Review of Economics and Finance, 2020, vol. 75, issue C, 84-94

Abstract: This paper suggests a new methodology to measure the extent of financial integration between countries or regions based on the combination of the dynamic conditional correlation-general autoregressive conditional heteroscedasticity (DCC-GARCH) and factor models. Unlike previous methodologies, this proposed methodology is able to assess whether countries decouple from the regional factor. The methodology is applied to assess the degree of financial integration between three African trading blocs, namely, the Common Market of Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC). The results of the empirical analysis show that not all countries within each of the three trading blocs are integrated to their regional factors. Moreover, the finding of the paper shows a ‘decoupling’ between some of the trading blocs.

Keywords: Financial integration; Factor model; DCC-GARCH model; African trading blocs (search for similar items in EconPapers)
JEL-codes: C5 C58 F15 F36 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: How financially integrated are trading blocs in Africa? (2017)
Working Paper: How financially integrated are trading blocs in Africa? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:75:y:2020:i:c:p:84-94

DOI: 10.1016/j.qref.2019.05.013

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