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Is African Interest-Rate Volatility Susceptible To International Spillovers?

Author

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  • Scott W. Hegerty

    (Northeastern Illinois University)

Abstract

In recent years, sub-Saharan Africa has begun to enjoy sustained growth. But continued financial integration might expose these economies to financial contagion. This study models monthly interest-rate volatility for six African nations,from 1992 to 2011, using Generalized Autoregressive Conditional Heteroskedasticity (GARCH) methods. We then examine spillovers both from the West and within the region using multivariate methods. We find that a standard GARCH or GARCH-in-Mean model performs as well as asymmetric alternatives, but that there is little evidence of international transmission outside of Southern Africa. This suggests that these countries still have a long way to go before they achieve true financial integration with the West.

Suggested Citation

  • Scott W. Hegerty, 2013. "Is African Interest-Rate Volatility Susceptible To International Spillovers?," The African Finance Journal, Africagrowth Institute, vol. 15(2), pages 1-21.
  • Handle: RePEc:afj:journl:v:15:y:2013:i:2:p:1-21
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    More about this item

    Keywords

    Interest Rate Volatility; Africa; Contagion; GARCH;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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