A Treatise on Financial Crises Contagion : The Case of African Securities Exchanges

We model the dynamics of African financial markets’ behaviour, in the current global context of international financial integration. In a framework of financial idiosyncratic shocks that takes for reference the last 2008 global financial crisis (GFC), the continent’s main financial market indices have been linked to those of a representative sample of developed countries. A dynamic panel Probit model shows the existence of a fundamentals-based contagion, which occurs from developed markets to African markets, through financial and commercial links, foreign exchange markets, and several domestic economic performance variables. A DCC-GARCH and SVAR detect some asymmetric dynamics in the conditional correlations of returns, between developed and African markets, which is hence an evidence of a psychological or pure contagion game. A determined rule setting policy by African monetary Authorities, should strengthen resilience of the continent’s financial markets to contagion from developed markets disorders.