We develop a global vector autoregressive model (GVAR) to analyze the global growth spillover effects on Africa. The model contains 46 African countries and 30 developed and emerging market countries, covering 90 percent of the world economy. The results suggest that there is a significant growth spillover effect to African economies from both the Euro zone economies and BRICs. In terms of the magnitudes, a percentage decline in Euro zone growth rate could lead to 0.34 to 0.6 percentage point drop in African countries growth rates while an equivalent shock in BRICs growth could dent African growth rate to the tune of 0.09 to 0.23 percentage points. In both cases, the adverse effects on fragile and resource dependent economies are closer to the upper bound while the lower bounds apply for the more diversified African countries. The paper also looks at the spillover effects of the US, Euro, UK, and Japan (G4) quantitative easing (QE). The results indicate that the QE could have a mild inflationary effect in addition to putting pressure on exchange rates to appreciate

Gurara, Daniel Zerfu; Ncube, Mthuli

We develop a global vector autoregressive model (GVAR) to analyze the global growth spillover effects on Africa. The model contains 46 African countries and 30 developed and emerging market countries, covering 90 percent of the world economy. The results suggest that there is a significant growth spillover effect to African economies from both the Euro zone economies and BRICs. In terms of the magnitudes, a percentage decline in Euro zone growth rate could lead to 0.34 to 0.6 percentage point drop in African countries growth rates while an equivalent shock in BRICs growth could dent African growth rate to the tune of 0.09 to 0.23 percentage points. In both cases, the adverse effects on fragile and resource dependent economies are closer to the upper bound while the lower bounds apply for the more diversified African countries. The paper also looks at the spillover effects of the US, Euro, UK, and Japan (G4) quantitative easing (QE). The results indicate that the QE could have a mild inflationary effect in addition to putting pressure on exchange rates to appreciate

Daniel Zerfu Gurara and Mthuli Ncube ()
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Daniel Zerfu Gurara: African Development Bank, Postal: 15 Avenue du Ghana P.O.Box 323-1002 Tunis-Belvedère, Tunisia, https://www.afdb.org/en/knowledge/publications

Working Paper Series from African Development Bank

Date: 2013-09-23
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