Abstract
This paper suggests a new methodology to measure the extent of financial integration between countries or regions based on the combination of the dynamic conditional correlation-general autoregressive conditional heteroscedasticity (DCC-GARCH) and factor models. Unlike previous methodologies, this proposed methodology is able to assess whether countries decouple from the regional factor. The methodology is applied to assess the degree of financial integration between three African trading blocs, namely, the Common Market of Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC). The results of the empirical analysis show that not all countries within each of the three trading blocs are integrated to their regional factors. Moreover, the finding of the paper shows a ‘decoupling’ between some of the trading blocs.
Original language | English |
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Pages (from-to) | 84-94 |
Number of pages | 11 |
Journal | Quarterly Review of Economics and Finance |
Volume | 75 |
DOIs | |
Publication status | Published - Feb 2020 |
Keywords
- African trading blocs
- DCC-GARCH model
- Factor model
- Financial integration
ASJC Scopus subject areas
- Finance
- Economics and Econometrics