Capital mobility and business cycle synchronization in Sub-Saharan Africa: The role of the digital economy

Simon Abendin and Duan Pingfang

The Journal of International Trade & Economic Development, 2022, vol. 31, issue 7, 1108-1126

Abstract: The existing literature on capital mobility-business cycle synchronization nexus has been centered on the implications of FDI for business cycles without investigating the various transmission channels of capital mobility on business cycles. More importantly, how digitalization mediates the relationship between capital mobility and business cycle synchronization remains unexplored. Our research addresses these gaps in the literature relying on the Panel Corrected Standard Errors (PCSE) model over the period 2014–2019 for 24 Sub-Saharan African (SSA) countries. The effect of capital mobility on business cycle synchronization proves to be affected positively by the digital economy development, and the effect of the digital economy on business cycle synchronization is positively strengthened by an increase in capital mobility in Sub-Saharan Africa. We further found that capital mobility and the digital economy have a causal relationship with business cycle synchronization. Our study reveals an important novelty in that the marginal effects on business cycle synchronization increase when capital mobility in the SSA interacts with the digital economy.

Date: 2022
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DOI: 10.1080/09638199.2022.2063928

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