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Dollarization and the “unbundling” of globalization in sub-Saharan Africa

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  • Ajide, Kazeem B.
  • Raheem, Ibrahim D.
  • Asongu, Simplice A.

Abstract

This study contributes to the dollarization literature by expanding its determinants to account for different dimensions of globalization, using the widely employed KOF index of globalization. Specifically, globalization is “unbundled” into three different layers namely: economic, social and political dimensions. The study focuses on 25 sub-Saharan African (SSA) countries for the period 2001–2012. Using the Tobit regression approach, the following findings are established. First, from both economic and statistical relevance, the social and political dimensions of globalization constitute the key dollarization amplifiers, while the explanatory power of the economic component is weaker on dollarization. Second, consistent with the theoretical underpinnings, macroeconomic instabilities (such as inflation and exchange rate volatilities) have the positive expected signs. Third, the positive association between the accumulation of international reserves and dollarization is also apparent. Policy implications are discussed.

Suggested Citation

  • Ajide, Kazeem B. & Raheem, Ibrahim D. & Asongu, Simplice A., 2019. "Dollarization and the “unbundling” of globalization in sub-Saharan Africa," Research in International Business and Finance, Elsevier, vol. 47(C), pages 398-409.
  • Handle: RePEc:eee:riibaf:v:47:y:2019:i:c:p:398-409
    DOI: 10.1016/j.ribaf.2018.09.002
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    Keywords

    Dollarization; Globalization; Sub-Saharan Africa; Tobit regression;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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