Does regional currency integration ameliorate global macroeconomic shocks in sub-Saharan Africa? The case of the 2008-2009 global financial crisis

Abstract

Purpose

The purpose of this paper is to consider whether regional currency integration in sub-Saharan Africa ameliorates global macroeconomic shocks by considering the impact of the 2008-2009 global financial crisis on economic growth. This suggests that Central Africa Franc Zone (CFAZ) eurocurrency union membership amplifies the effects of global business cycles in sub-Saharan Africa.

Design/methodology/approach

The authors estimate the parameters of a quantity theory model of economic growth within a Generalized Estimating Equation (GEE) Framework.

Findings

Parameter estimates from GEE specifications reveal that the contraction in credit during the financial crisis of 2008-2009 had larger adverse growth effects on sub-Saharan African countries who were members of the CFAZ eurocurrency union. The authors also find that sub-Saharan African countries who were members of the CFAZ eurocurrency union were more likely to experience a contraction in credit.

Originality/value

As far as the authors can discern, no existing empirical growth models use a GEE framework to estimate parameters of interest. The GEE parameter estimates are distribution-free, robust with respect to unknown forms of heteroskedasticity, and control for a wide variety of error structures that can induce bias in panel data parameter estimates.

Citation

N. Price, G. and U. Elu, J. (2014), "Does regional currency integration ameliorate global macroeconomic shocks in sub-Saharan Africa? The case of the 2008-2009 global financial crisis", Journal of Economic Studies, Vol. 41 No. 5, pp. 737-750. https://doi.org/10.1108/JES-08-2011-0092