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How financially integrated are trading blocs in Africa?

Lumengo Bonga-Bonga

No 10580, EcoMod2017 from EcoMod

Abstract: This paper endeavours 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). For this end, the paper suggests a combination of the dynamic conditional correlation general autoregressive conditional heteroscedastic (DCC-GARCH) and factor models. the results of the empirical analysis show that countries within each of the three trading blocs are not all integrated to their regional factors. Moreover, the finding of the paper shows a 'decoupling' between some of the trading blocs. Robustness test is conducted to support these results and shows that the proposed method provides a better way to measure integration than other methods, such as the multi-factor R-square method proposed by Pukthuanthong and Roll (2009).

Keywords: Eastern and Southern Africa; Trade and regional integration; Developing countries (search for similar items in EconPapers)
JEL-codes: F00 (search for similar items in EconPapers)
Date: 2017-07-04
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Journal Article: How financially integrated are trading blocs in Africa? (2020) Downloads
Working Paper: How financially integrated are trading blocs in Africa? (2016) Downloads
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