Comovement Between Africa and Advanced Economies: 1980-2011

3 February 2016
Publication Type: Working Paper
JEL Code: E32, F44, G01, O55

This paper analyses business cycle comovement between African economies and advanced economies. It covers the period 1980 to 2011. The empirical analysis is based on the Dynamic Factor Model applied to annual data for African and G7 countries, covering the period 1980 to 2011. The results indicate that middle-income African countries show consistent business cycle variance shares, both before and after controlling for the influence of the G7. This implies that while middle-income African countries have coupled to the G7 business cycle since the 1980s, they have also coupled among themselves. Trade appears to be the important factor underlying the comovement. This is not the case for oil exporting countries and low-income economies that have, after controlling for the influence of the G7, all decoupled during the Great Recession. The case for fragile states is not conclusive, although these states do rely much more on trade with other African groups than with the G7.

Series title: Working paper 577
1 February 2016
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