How financially integrated are trading blocs in Africa?

MPRA Paper from University Library of Munich, Germany

Abstract: This paper assesses 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). The paper suggests a measure of financial integration based on the combination of the dynamic conditional correlation-general autoregressive conditional heteroscedastic (DCC-GARCH) and factor models. The results of the empirical analysis show that not all countries within each of the three trading blocs are 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 the results of the empirical analysis 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).

Keywords: Financial integration; African trading blocs; factor model; DCC GARCH (search for similar items in EconPapers)
JEL-codes: C55 C58 F36 (search for similar items in EconPapers)
Date: 2016-12-22
New Economics Papers: this item is included in nep-afr
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: How financially integrated are trading blocs in Africa? (2020)
Working Paper: How financially integrated are trading blocs in Africa? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:75716

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