Transmission channels of international financial crises to African stock markets: the case of the euro sovereign debt crisis |
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Authors: | Sandrine Kablan Olfa Kaabia |
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Affiliation: | 1. ERUDITE, University of East Paris Creteil, Créteil, France;2. INSEEC lab, INSEEC Business school, Paris, France |
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Abstract: | This article investigates the effects of the European sovereign debt crisis on African stock markets within a Bayesian shrinkage VAR framework. This method allows us to consider both North African and Sub-Saharan African stock markets, and provides a flexible parsimonious specification. The results reveal varying reactions of the impulse response functions. The most exposed African stock markets are those of Egypt, South Africa and Mauritius, while the least affected stock market is, surprisingly, that of Ivory Coast. Our analysis shows that, in addition to direct transmission, several macroeconomic and market channels, such as commodities, exports, and exchange rates, are relevant. Specifically, countries with strong commercial links to European countries will be most impacted by the crisis. The severity of transmission also depends on the country’s dependence on commodities. |
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Keywords: | African stock markets European Sovereign debt crisis transmission effects Bayesian vector autoregression |
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