Financial contagion during the COVID-19 pandemic: the case of African countries

Imen Zorgati, Faten Albouchi and Riadh Garfatta

International Journal of Accounting, Auditing and Performance Evaluation, 2024, vol. 20, issue 1/2, 23-42

Abstract: This study investigates pure financial contagion and interdependence as well as the nature of causal relationships between stock markets during the COVID-19 pandemic. We use the daily stock index series of China and African countries namely Tunisia, Egypt, Morocco, Uganda, Kenya, Ivory Coast, Nigeria, South Africa, and Zambia from January 1, 2016 to September 30, 2021.We adopt the cointegration and causality approaches to distinguish cases of pure contagion and interdependence by estimating VAR and VECM models. We find 11 cases of pure contagion, including 7 cases in the short term and four cases in the long term. Moreover, we distinguish 6 cases of financial interdependence including 2 cases in the short term and 4 in the long term. These results provide several implications for investors who seek to diversify their portfolios internationally, and for portfolio managers to predict and minimise market risk. Our findings offer also guidance for regulators and policymakers.

Keywords: Covid-19 pandemic; pure contagion; interdependence; cointegration; causality. (search for similar items in EconPapers)
Date: 2024
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