Regional Spillovers in Sub-Saharan Africa: Exploring Different Channels

By Francisco Arizala, Matthieu Bellon, Margaux MacDonald, Montfort Mlachila, Mustafa Yenice

August 1, 2018

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Francisco Arizala, Matthieu Bellon, Margaux MacDonald, Montfort Mlachila, and Mustafa Yenice. Regional Spillovers in Sub-Saharan Africa: Exploring Different Channels, (USA: International Monetary Fund, 2018) accessed September 20, 2024

Summary

After close to two decades of strong economic activity, overall growth in sub-Saharan Africa decelerated markedly in 2015–16 as the largest economies experienced negative or flat growth. Regional growth started recovering in 2017, but the question remains of how trends in the economies stuck in low gear will spill over to the countries that have maintained robust growth. This note illuminates the discussion by identifying growth spillover channels. The focus is on trade, banking, financial, remittance, investment, fiscal, and security channels, which are the most prominent and most likely to transmit growth trends across borders. In addition to bringing together findings from a broad array of existing research, the note identifies countries that are the most likely sources of regional spillovers and those that are most likely to be impacted, and provides estimates for the size of these channels. It finds that intraregional trade and remittance flows are an important channel for growth spillovers, while banking channels are less important but will remain a risk going forward. Finally, the note documents other important spillover channels through financial markets contagion, revenue-sharing arrangements in fiscal unions, commodity-pricing policies, corporate investment, and forced migration. The main takeaway is that the level of interdependence among sub-Saharan countries is higher than is generally assumed. Consequently, there is a need for additional emphasis on regional surveillance and spillover analysis, along with traditional bilateral surveillance.

Subject: Balance of payments, Banking, Emerging and frontier financial markets, Exports, Financial markets, Financial sector policy and analysis, International trade, Regional trade, Remittances, Spillovers

Keywords: Africa, East Africa, Economic activity, Emerging and frontier financial markets, Emerging market, Exports, Foreign direct investment, Global, Gravity equation estimation, IMF staff calculation, Inflation rate, Oil-producing country, Origin country, Real GDP, Regional trade, Remittance flow, Remittances, SACU member country, SN, Southern Africa, Spillovers, Sub-Saharan Africa, Sub-Saharan Africa origin, Sub-Saharan Africa region, Trade spillover, Trading partner

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Spillover Notes No. 2018/001
Stock No:

SNEA2018001
ISBN:

9781484367148
ISSN:

2522-7890

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