Composite indicator of systemic integration for Southern African development community

The aim of this paper is to provide a comprehensive overview of the level of integration of the financial markets of Southern African Development Community (SADC). This paper contributes to the literature by developing a new index to measure the degree and evolution of financial integration of SADC. The index is calculated by weighting together a set of indicators for financial integration from four financial market segments namely the banking, money, Treasury-bill and equity markets. The results displayed high volatility during the period under review. This volatility gives an indication that prices react quickly to new information. The results also indicate a time changing pattern of integration among the member countries and are also influenced by both internal and external factors influencing the financial system of SADC. Integration scores have increased for those countries that have implemented financial reforms. We recommend policymakers to formulate a proper framework for regional financial integration to guide the integration process smoothly and contain key realistic milestones.