Regional Spillovers in Sub-Saharan Africa: Exploring Different Channels

Francisco Arizala, Matthieu Bellon, Margaux MacDonald (), Montfort Mlachila and Mustafa Yenice

No 2018/001, IMF Spillover Notes from International Monetary Fund

Abstract: After close to two decades of strong economic activity, overall growth in sub-Saharan Africa decelerated markedly in 2015–16 as the largest economies experienced negative or flat growth. Regional growth started recovering in 2017, but the question remains of how trends in the economies stuck in low gear will spill over to the countries that have maintained robust growth. This note illuminates the discussion by identifying growth spillover channels. The focus is on trade, banking, financial, remittance, investment, fiscal, and security channels, which are the most prominent and most likely to transmit growth trends across borders. In addition to bringing together findings from a broad array of existing research, the note identifies countries that are the most likely sources of regional spillovers and those that are most likely to be impacted, and provides estimates for the size of these channels. It finds that intraregional trade and remittance flows are an important channel for growth spillovers, while banking channels are less important but will remain a risk going forward. Finally, the note documents other important spillover channels through financial markets contagion, revenue-sharing arrangements in fiscal unions, commodity-pricing policies, corporate investment, and forced migration. The main takeaway is that the level of interdependence among sub-Saharan countries is higher than is generally assumed. Consequently, there is a need for additional emphasis on regional surveillance and spillover analysis, along with traditional bilateral surveillance.

Keywords: SN; economic activity; trading partner; foreign direct investment; emerging market; real GDP; IMF staff calculation; origin country; remittance flow; sub-Saharan Africa region; sub-Saharan Africa origin; oil-producing country; trade spillover; SACU member country; inflation rate; gravity equation estimation; Remittances; Spillovers; Exports; Emerging and frontier financial markets; Regional trade; Sub-Saharan Africa; Africa; Global; East Africa; Southern Africa (search for similar items in EconPapers)
Pages: 49
Date: 2018-08-01
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Citations: View citations in EconPapers (3)

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