The global financial crisis: An analysis of the spillover effects on African stock markets

Abstract

This paper examines the relative importance of the global and regional markets for financial markets in developing countries, particularly during the US financial crisis and the European sovereign debt crisis. We examine the way in which the degree of regional (seven African markets combined), global (China, France, Germany, Japan, the UK and the US), commodity (gold and petroleum), and nominal effective exchange rate (Euro and US dollar) spillovers to individual African countries evolve during the two crises through the econometric method introduced by Diebold and Yilmaz (2012). We find that African markets are most severely affected by spillovers from global markets and modestly from commodity and currency markets. Conversely, the regional spillovers within Africa are smaller than the global ones and are insulated from the global crises. We also find that the aggregated spillover effects of European countries to the African markets exceeded that of the US even at the wake of the US financial crisis.

The Effect of 2008 Crisis on the Volatility Spillovers among Six Major Markets

“…Some other papers such as Hwang (), Sugimoto et al. (), Meric et al. (), Samarakoon (), Chakrabarti (), Gklezakou and Mylonakis (), and Majid and Kassim () investigate the effect of the last global financial crisis on the financial linkages among countries.…”

“…Tsai (2014), Trenca and Dezsi (2013), Atukeren et al (2013), Grobys (2010), Baele (2005), and Choudhry (2004) are some of the examples which try to analyze the spillover effects among different countries' stock markets. Some other papers such as Hwang (2014), Sugimoto et al (2014), Meric et al (2012), Samarakoon (2011), Chakrabarti (2011), Gklezakou and Mylonakis (2010), and Majid and Kassim (2009) investigate the effect of the last global financial crisis on the financial linkages among countries. Although there are already papers in the literature which examine the effects of the crisis on the volatility spillovers, our paper contributes to the literature in terms of the methodology that we employ as well as in examining the post crisis period in detail.…”

Time Varying Asian Stock Market Integration

“…See the following for recent studies on market segmentation and completeness:Li, 2013;Jacobs et al 2013;Thuraisamy and Gannon, 2013;Mishra and Ratti, 2013: Cakici et al 2013;Sugimoto et al 2014;Erdem and Varli, 2014;Guyot et al 2014.…”

Systemic Risks Spillovers and Interdependence among Stock Markets: International Evidence with Covar‐Copulas

“…Recent global economic and financial developments have re‐ignited the need to re‐assess emerging economies independence and self‐sufficiency levels (Claessens et al, ), in the broader context of the global economy. In this context, Africa deserves particular attention due to its recent strengthening of economic links with developed countries (see Sugimoto et al, ). Further, with open market policies to international investors and increased efforts at overcoming barriers to international trade, investments in African economies have increasingly become attractive to foreign investors.…”