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Evaluating interdependencies in African markets A VECM approach

Author

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  • Konstantinos Vergos
  • Benjamin Wanger

Abstract

This study evaluates the linkages between stock markets and macroeconomic data in the sub-Sahara Africa during the 2008 –2018 period by using VECM. Our findings confirm unidirectional and bidirectional causalities, and a long-run equilibrium between the indexes, the stock exchanges and their national economies. The contemporaneous sectoral infectivity surpasses the long-run responses. While the banking sector was found to lead markets and macroeconomic indices, Nigerian, Moroccan and Swaziland markets were found to be most weakly integrated. Our findings provide a unique evidence of interdependence between African peripheral markets that could be used in cross-hedging and speculative strategies in fund management.

Suggested Citation

  • Konstantinos Vergos & Benjamin Wanger, 2019. "Evaluating interdependencies in African markets A VECM approach," Bulletin of Applied Economics, Risk Market Journals, vol. 6(1), pages 65-85.
    • Handle: RePEc:rmk:rmkbae:v:6:y:2019:i:1:p:65-85
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    More about this item

    Keywords

    Asset pricing; Africa; interdependence; VECM;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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