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How financially integrated are trading blocs in Africa?

Author

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  • Lumengo Bonga-Bonga

Abstract

This paper endeavours to assess the degree of financial integration between three African trading blocs, namely, the Common Market of Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC). For this end, the paper suggests a combination of the dynamic conditional correlation general autoregressive conditional heteroscedastic (DCC-GARCH) and factor models. the results of the empirical analysis show that countries within each of the three trading blocs are not all integrated to their regional factors. Moreover, the finding of the paper shows a 'decoupling' between some of the trading blocs. Robustness test is conducted to support these results and shows that the proposed method provides a better way to measure integration than other methods, such as the multi-factor R-square method proposed by Pukthuanthong and Roll (2009).

Suggested Citation

  • Lumengo Bonga-Bonga, 2017. "How financially integrated are trading blocs in Africa?," EcoMod2017 10580, EcoMod.
    • Handle: RePEc:ekd:010027:10580
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    2. Shi, Yangyan & Feng, Yu & Zhang, Qi & Shuai, Jing & Niu, Jiangxin, 2023. "Does China's new energy vehicles supply chain stock market have risk spillovers? Evidence from raw material price effect on lithium batteries," Energy, Elsevier, vol. 262(PA).
    3. David Oluseun Olayungbo & Badar Alam Iqbal, 2021. "An empirical analysis of African trade blocs effects on the global economy: new evidence from the gravity model," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.
    4. Lumengo Bonga-Bonga & Tebogo Maake, 2021. "The Relationship between Carry Trade and Asset Markets in South Africa," JRFM, MDPI, vol. 14(7), pages 1-13, July.
    5. Oyenyinka Sunday Omoshoro‐Jones & Lumengo Bonga‐Bonga, 2022. "Intra‐regional spillovers from Nigeria and South Africa to the rest of Africa: New evidence from a FAVAR model," The World Economy, Wiley Blackwell, vol. 45(1), pages 251-275, January.

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    JEL classification:

    • F00 - International Economics - - General - - - General

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