Contagion risk in african sovereign debt markets: A spatial econometrics approach

J. W. Muteba Mwamba, Mathias Manguzvane

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


This study applies the spatial Durbin model to analyse the extent to which international trade and geographical proximity affect the stability of African sovereign-debt markets. Using sovereign credit default swap spreads, our empirical findings show that it is not only a country's macroeconomic fundamentals that influence its likelihood of default but also contagion from other countries. Trade linkages are found to be a strong transmission channel for contagion risk, especially among countries that trade heavily. A decomposition of the results demonstrates that at least 60% of the variation in credit default swap spread changes is attributed to spillovers through the trading channel. A change in the weighting matrix to geographical proximity confirms the baseline findings that an African country's debt market is susceptible to macroeconomic events in other countries.

Original languageEnglish
Pages (from-to)506-536
Number of pages31
JournalInternational Finance
Issue number3
Publication statusPublished - 1 Dec 2020


  • Africa
  • contagion
  • sovereign debt
  • spatial econometrics

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Finance


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