Sub-Saharan Africa's Integration in the Global Financial Markets

IMF Working Papers, May 1, 2009

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Sub-Saharan Africa's Integration in the Global Financial Markets

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Bibliographic details

• Authors: Corinne C Delechat, John Wakeman-Linn, Smita Wagh, Gustavo Ramirez
• Published: May 1, 2009
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451872613.001

Summary

• Paper uses a unique database covering 44 countries in sub-Saharan Africa (SSA) between 2000 and 2007 to study:
  • determinants of the allocation and composition of flows across countries, and
  • channels through which private capital flows could affect growth.
• In the sample, "the degree of financial market development is an important determinant of the distribution of capital flows across countries as opposed to property rights institutions."
• The paper finds a "fairly consistent positive association between net capital flows and growth for SSA countries" but notes the data do not allow conclusive inferences about a causality relationship.

Key findings and observations

• Coverage and period:
  • 44 countries in sub-Saharan Africa.
  • Period: between 2000 and 2007.
• Determinants of capital flow allocation:
  • Financial market development: identified as an important determinant of distribution of capital flows across countries.
  • Property rights institutions: found to be less important than financial market development for distribution of capital flows in the sample.
• Relationship between flows and growth:
  • Net capital flows show a fairly consistent positive association with growth for SSA countries in the sample.
  • Causality between net capital flows and growth cannot be conclusively inferred from the data.

Policy implications and research considerations

• Emphasis for policymakers and researchers:
  • Financial market development appears central for attracting and allocating private capital flows across SSA countries.
  • Strengthening financial market infrastructure and depth could influence the composition and distribution of capital inflows.
• Caution in interpretation:
  • Positive association between net capital flows and growth does not establish causality given data limitations; further research with causal identification is implied.

IMF Working Paper by Corinne C Delechat, John Wakeman-Linn, Smita Wagh, and Gustavo Ramirez; May 1, 2009.

Content in this bundle

• 1. Private Capital Flows Volatility
  • 1. Private Capital Flows Volatility (Markdown version)
  • 1. Private Capital Flows Volatility (PDF)