Crisis financial contagion in African countries: essence, features, assessments

Abstract

The article analyzes the features of the spread of financial crises in African countries in the context of the concept of financial contagion. The application of existing criteria for detecting local crises has made it possible to record numerous episodes of banking, currency and debt crises in the African region. The greatest severity of crises was experienced by such countries as the Democratic Republic of the Congo, Ghana, and Zambia. At the same time, in modern conditions, the severity of financial crises has decreased compared to 1990-2000. Banking crises in Africa have not been observed since 2017, but in general, for many years the region has demonstrated an increased crisis burden, especially in terms of debt crises. It is advisable to study the interconnectedness of crises on the basis of the methodology of financial contagion, i.e. the process of spreading negative shocks and crises from one country (region, sector of the economy) to another country (region, sector). Many empirical studies confirm the susceptibility of African economies to such contagion. Moreover, with the growing involvement of Africa in the global world economic system, the frequency and intensity of financial contagion also increases. Today, the main channel of transmission of contagion from the leading economies of the world is trade. Through this channel, contagion was detected in South Africa, Tunisia, Morocco and other countries. The article presents the results of the author's empirical study conducted in relation to a number of African countries in order to identify contagion during the periods of the global financial (2007-2009) and pandemic (2020) crises. The use of an extensive statistical base on the dynamics of stock indices and special tests made it possible to conclude that South Africa was the only recipient of financial contagion in both crises. The susceptibility of this country to contagion is explained by its close trade and financial ties with the world's leading economies. Most African countries react poorly to external shocks (test statistics did not confirm contagion), and the reaction to COVID-19 was even weaker than to the global financial crisis.