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Exchange market pressure, stock prices, and commodity prices in West Africa

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  • Scott W. Hegerty

Abstract

As Africa continues its decade of rapid economic growth, the continent also faces the risk of becoming more susceptible to financial 'contagion.' Capital flows and trade linkages might cause one country's currency market to influence those of its neighbors. Likewise, shocks to global commodity or asset markets might induce a crisis in one or more countries in the region. This study generates monthly measures of exchange market pressure (EMP) for four individual West African countries, as well as for the WAEMU franc zone, from 2002 to 2012. Vector Autoregressive (VAR) methods are then used to test for linkages among them, as well as to analyze the effects of various external price shocks. A number of spillovers are uncovered. More importantly, local connections dominate global ones in the case of stock- and commodity-price declines. Ghana, for example, is shown to be a 'commodity currency' when West African commodity prices are included in the VAR, but not when a global index is used.

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  • Scott W. Hegerty, 2013. "Exchange market pressure, stock prices, and commodity prices in West Africa," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(6), pages 750-765, November.
    • Handle: RePEc:taf:irapec:v:27:y:2013:i:6:p:750-765
    DOI: 10.1080/02692171.2013.819841
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    1. Hegerty, Scott W., 2016. "Commodity-price volatility and macroeconomic spillovers: Evidence from nine emerging markets," The North American Journal of Economics and Finance, Elsevier, vol. 35(C), pages 23-37.
    2. A D Adom, 2016. "Resilience of developing countries to shocks: Case study of WAEMU countries with SUR and VAR Approaches," Economic Issues Journal Articles, Economic Issues, vol. 21(2), pages 105-138, September.
    3. Aleksandr V. Gevorkyan, 2019. "Exchange market pressure and primary commodity – exporting emerging markets," Applied Economics, Taylor & Francis Journals, vol. 51(22), pages 2390-2412, May.
    4. Debasish Maitra & Varun Dawar, 2019. "Return and Volatility Spillover among Commodity Futures, Stock Market and Exchange Rate: Evidence from India," Global Business Review, International Management Institute, vol. 20(1), pages 214-237, February.
    5. Muhammad Aftab & Abid Ali & Scott W. Hegerty, 2021. "Foreign exchange market pressure and stock market dynamics in emerging Asia," International Economics and Economic Policy, Springer, vol. 18(4), pages 699-719, October.

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