Responses of African economies to the international economic shocks: an empirical study

Abstract

The objective of this paper is to verify the assumption of decoupling or re-coupling African economic condition and international economic shocks. This assumption is tested in 15 African countries using a SVAR model for the period 1970-2007 and the results suggest that there is re-coupling. In fact, 12 countries are exposed to OEDC GDP per capita shocks, six to Federal funds effective rate shocks and five to World price of oil shocks. Furthermore, we investigate the viability of the creation of an economic and monetary union and a unified currency among African countries by comparing the reaction of African economies to those international shocks. The impulse response functions of these economies after an international income, monetary or price shocks tend to be more or less similar. According to this indicator, we are optimistic for the possibility and the viability of this project.