Connectedness Across Commodities, Stocks, Exchange Rates And Bonds Markets In Africa: The Covid-19 Pandemic Case
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Date
2023
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Publisher
International Journal of Emerging Markets
Abstract
Purpose: The study measures the total systemic risks and connectedness across commodities, stocks,
exchange rates and bond markets in Africa during the Covid-19 pandemic.
Design, methodology, and approach: The study uses Diebold-Yilmaz spillover and connectedness
measures in a generalized VAR framework. The author calculates the net transmitters or receivers of shocks
between two assets and visualizes their strength using a network analysis tool.
Findings: The study found low systemic risks across all assets and countries. However, we found higher
systemic risks in the forex market than in the stock and bond markets, and in South Africa than in other countries.
The dynamic analysis found time-varying connectedness return shocks, which increased during the peak periods
of the first and second waves of the pandemic. We found both gold and oil as net receivers of shocks. Overall, over
half of all assets were net receivers, and others were net transmitters of return shocks. The network's connectedness
plot shows high net pairwise connectedness from Morocco to South African stock market.
Practical implications: The study has implications for policymakers to develop the capacities of local
investors and markets to limit portfolio outflows during a crisis.
Originality/value: Previous studies have analyzed spillovers across asset classes in a single country or a
single asset across countries. This paper contributes to the literature on network connectedness across assets
and countries.
Description
Research Article
Keywords
Africa, Covid-19, Commodities