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Crises, Economic Integration and Growth Collapses in African Countries

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  • Abdilahi Ali
  • Katsushi S. Imai

Abstract

In the past few decades, many African countries have implemented policies of trade and financial liberalisation. As a result, Africa is today more integrated into the global economic system than it was a few decades ago. Yet, like developing countries in other regions, African economies have also encountered their share of economic and financial crises. The objective of this paper is to explore the (independent) effects of crises and openness on a large sample of African countries. Focusing on sudden stops, currency, twin and sovereign debt crises, the paper shows that crises are associated with growth collapses in Africa. In contrast, openness is found to be beneficial to growth. More specifically, we find that, consistent with standard Mundell-Flemming type models, greater openness to trade and financial flows mitigates the adverse effects of crises. These findings are robust to various measures of both openness and crises as well as to endogeneity concerns.

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Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 1302.

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Date of creation: 2013
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Handle: RePEc:man:sespap:1302

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