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The impact of the US yield curve on sub-Saharan African equities

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  • Bossman, Ahmed
  • Umar, Zaghum
  • Agyei, Samuel Kwaku
  • Teplova, Tamara

Abstract

We study the impact of the components of the US yield curve on sub-Saharan African (SSA) equities. In a time-varying parameter vector auto-regressions connectedness model, we find that the short- and long-term maturities of the US yield curve significantly drive the connectedness between SSA equities whilst serving as the main sources of contagious spillovers in crisis periods. We find that the responses of SSA equities to returns and volatility spillovers in a system containing the yield curve's components are nonhomogeneous, rekindling the need for cross-market/asset hedging using SSA equities. Our findings have implications for international investors, regulators, and practitioners alike.

Suggested Citation

  • Bossman, Ahmed & Umar, Zaghum & Agyei, Samuel Kwaku & Teplova, Tamara, 2023. "The impact of the US yield curve on sub-Saharan African equities," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000107
    DOI: 10.1016/j.frl.2023.103636
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    References listed on IDEAS

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    More about this item

    Keywords

    Term structure of interest rates; Yield curve; Sub-saharan Africa; Emerging equity markets; Financial contagion; Spillover connectedness; Delayed contagion;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N27 - Economic History - - Financial Markets and Institutions - - - Africa; Oceania

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