Financial Integration Amongst The Sacu Countries: Evidence From Interest Rate Pass-Through Analysis

Meshach Aziakpono

Studies in Economics and Econometrics, 2006, vol. 30, issue 2, 1-23

Abstract: Using cointegration and error correction techniques, as well as impulse response analysis, the study examined the extent of interest rates pass-through to measure the degree of financial integration amongst the SACU countries. The results confirm the dominant role of South Africa in the Union and show that there exists a hierarchy of integration of the financial systems of each member state with that of South Africa, with Namibia at the top, followed by Swaziland, then Lesotho, with Botswana at the bottom. The results further suggest that the prevailing integration between the financial systems is mainly as a result of policy convergence, rather than market convergence, which suggest limited arbitrage opportunities between the countries. The lack of arbitrage opportunities is attributed to poor institutional developments and limited investment opportunities in the BLNS countries when compared to South Africa.

Date: 2006
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DOI: 10.1080/10800379.2006.12106405

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