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Political Crises and Risk of Financial Contagion in Developing Countries: Evidence from Africa

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  • Asongu Simplice

    ()
    (Yaoundé/Cameroun)

Abstract

The recent waves of political crises in Africa and the Middle East have inspired the debate over how political instability could pose a risk of financial contagion to emerging countries. With retrospect to the Kenyan political crisis, our findings suggest stock markets in Lebanon, Mauritius were contaminated while Nigeria experienced a positive spillover. Our results have two major implications. Firstly, we have confirmed existing consensus that African financial markets are increasingly integrated. Secondly, we have also shown that international financial market transmissions not only occur during financial crisis; political crises effects should not be undermined.

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File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/Political-crises-in-Africa-and-risk-of-financial-contagion.pdf
File Function: Revised version, 2013
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Bibliographic Info

Paper provided by African Governance and Development Institute. in its series Working Papers with number 11/003.

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Length: 14
Date of creation: 04 Apr 2011
Date of revision:
Publication status: Published in the Journal of Economics and International Finance
Handle: RePEc:agd:wpaper:11/003

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Keywords: Political crisis; Contagion; Developing countries; Equity Markets;

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References

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  1. Simplice A, Asongu, 2011. "Globalization, financial crisis and contagion: time-dynamic evidence from financial markets of developing countries," MPRA Paper 30120, University Library of Munich, Germany.
  2. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 534, Board of Governors of the Federal Reserve System (U.S.).
  3. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany.
  4. Simplice A., Asongu, 2011. "The 2011 Japanese earthquake, tsunami and nuclear crisis: evidence of contagion from international financial markets," MPRA Paper 31174, University Library of Munich, Germany.
  5. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, American Economic Association, vol. 76(1), pages 72-81, March.
  6. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, American Finance Association, vol. 57(5), pages 2223-2261, October.
  7. Haile, Fasika & Pozo, Susan, 2008. "Currency crisis contagion and the identification of transmission channels," International Review of Economics & Finance, Elsevier, Elsevier, vol. 17(4), pages 572-588, October.
  8. Angelos Kanas, . "Linkages between the US and European Equity Markets: Further Evidence from cointegration Tests," Working Papers, University of Crete, Department of Economics 9804, University of Crete, Department of Economics.
  9. Sergio L. Schmukler, 2004. "Financial globalization: gain and pain for developing countries," Economic Review, Federal Reserve Bank of Atlanta, Federal Reserve Bank of Atlanta, issue Q 2, pages 39 - 66.
  10. Kristin Forbes, 2000. "The Asian Flu and Russian Virus: Firm-level Evidence on How Crises are Transmitted Internationally," NBER Working Papers 7807, National Bureau of Economic Research, Inc.
  11. King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994. "Volatility and Links between National Stock Markets," Econometrica, Econometric Society, Econometric Society, vol. 62(4), pages 901-33, July.
  12. Lee, Hsien-Yi & Wu, Hsing-Chi & Wang, Yung-Jang, 2007. "Contagion effect in financial markets after the South-East Asia Tsunami," Research in International Business and Finance, Elsevier, Elsevier, vol. 21(2), pages 281-296, June.
  13. King, Mervyn A & Wadhwani, Sushil, 1990. "Transmission of Volatility between Stock Markets," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 3(1), pages 5-33.
  14. Collins, Daryl & Biekpe, Nicholas, 2003. "Contagion: a fear for African equity markets?," Journal of Economics and Business, Elsevier, Elsevier, vol. 55(3), pages 285-297.
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Cited by:
  1. Simplice A, Asongu, 2011. "Globalization, financial crisis and contagion: time-dynamic evidence from financial markets of developing countries," MPRA Paper 30120, University Library of Munich, Germany.
  2. Simplice A., Asongu, 2011. "The 2011 Japanese earthquake, tsunami and nuclear crisis: evidence of contagion from international financial markets," MPRA Paper 31174, University Library of Munich, Germany.
  3. Asongu Simplice, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," Working Papers, African Governance and Development Institute. 13/035, African Governance and Development Institute..
  4. repec:pra:mprapa:39629 is not listed on IDEAS

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