Structural dependencies in African economies: business cycle synchronization and spillover effects

We research synchronization and spillover effects in business cycles of 48 African economies (1970–2023), set into four structural clusters: fragile states, agricultural commodity exporters, oil exporters, and emerging market economies (EMEs). Utilizing Hodrick-Prescott and Hamilton filtered real GDP data; we measure synchronization via multilateral correlations and output growth differentials relative to group averages. Spillover dynamics are captured via the Diebold & Yilmaz spillover index, while BCS determinants are identified via System-GMM estimation. Structural composition, institutional quality, and governance capacity fundamentally govern BCS in Africa. While fragile and oil-exporting nations exhibit moderate synchronization from shared exposure to external shocks, internal synchronization is weak. EMEs stand as the most synchronized unit, reinforced by diversified production, deeper trade, and better economic management, positioning them as leaders for potential monetary integration. Vitally, spillovers alone are insufficient to sustain convergence without supportive institutional bases and coherent policy. We suggest a gradual, multi-speed approach to economic integration, with EMEs anchoring initial monetary cooperation, oil-exporters progressively integrating through fiscal discipline and trade diversification, and fragile/agricultural economies focusing on structural renovation and governance consolidation. Fiscal policy coordination, industrial policy alignment, and intra-African value chain development are essential to reduce asymmetries and foster durable synchronization.