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Trade Linkages and Business Cycle Co-movement: Analysis of Trade between African Economies and their Main Trading partners

Author

Listed:
  • Kinfack, Emilie

    (Department of Economics and Econometrics, University of Johannesburg, South Africa)

  • Bonga-Bonga, Lumengo

    (Department of Economics and Econometrics, University of Johannesburg, South Africa)

Abstract

This paper seeks to uncover what drives the nature of the link between trade linkages and business cycle synchronization by empirically assessing this link between African economies and their main trading partners, namely China, Europe and the United States (US). Contrary to past papers, this paper determines endogenously the magnitude of trade linkage by assessing how trade shocks are transmitted between Africa and its main trading partners in the periods before and after the 1990s. Moreover, the paper assesses the extent of business cycle synchronization between Africa and these trading partners during the same periods. The global vector autoregressive (GVAR) model and the Instantaneous Quasi Correlation (IQC) method are used to this end. The results of the empirical analysis show that not only the nature of trade but also the mode of trade financing or trade settlement should matter in determining the relationship between trade linkages and business cycle synchronisation. Legami commerciali e comovimenti del ciclo commerciale: analisi dei rapporti commerciali tra le economie dell’Africa e ed i loro principali partner Questo articolo ha lo scopo di far emergere che cosa guida la sincronizzazione del rapporto tra commercio e ciclo economico tramite la valutazione dei rapporti commerciali delle economie africane con i loro principali partner: Cina, Europa e Stati Uniti. Al contrario degli studi già esistenti in materia, questo paper determina la dimensione del rapporto commerciale in maniera endogena studiando in che modo gli shock commerciali si trasmettono dall’Africa ai suoi partner a partire dagli anni ’90. Inoltre, l’articolo valuta il livello della sincronizzazione del ciclo economico tra Africa e i suddetti partner durante lo stesso periodo con l’utilizzo del modello GVAR (Global Vector Autoregressive) e del metodo IQC (Instantaneous Quasi Correlation). I risultati dell’analisi empirica dimostrano che non soltanto la natura ma anche la modalità di finanziamento o di implementazione del commercio dovrebbe essere presa in considerazione per determinare le relazioni di sincronizzazione tra commercio e ciclo economico.

Suggested Citation

  • Kinfack, Emilie & Bonga-Bonga, Lumengo, 2020. "Trade Linkages and Business Cycle Co-movement: Analysis of Trade between African Economies and their Main Trading partners," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(2), pages 275-306.
    • Handle: RePEc:ris:ecoint:0872
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    References listed on IDEAS

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    2. Andretta Tsebe, 2022. "Business Cycles and Growth of South African Steel Manufacturing Industry," Journal of Economics and Behavioral Studies, AMH International, vol. 14(1), pages 6-22.

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    More about this item

    Keywords

    Trade Linkages; GVAR Model; Business Cycle Synchronization; Africa;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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