This study aims to explore how global shocks affect African economies through different transmission channels, with a special focus on what these asymmetries mean for Africa’s unified monetary space.
This study uses a Global Vector Autoregressive (GVAR) model covering 87 countries, 48 from Africa, over the period 1970–2023. African economies are grouped into four structural clusters: fragile states, agri-commodity exporters, oil-exporting nations and emerging markets. This typology enables a clearer view of how spillovers propagate and how macro-financial dynamics vary across the continent.
The results show that African emerging markets are more resilient to global shocks, whereas fragile and oil-exporting economies remain highly vulnerable. Economic fragility, more than resource dependence, emerges as the key barrier to convergence. Inflation is the main channel of global spillovers, whereas weak financial integration limits the role of capital flows. Fragile states experience stronger exchange rate pass-through, complicating nominal alignment. Fiscal spillovers are also uneven: trade-driven economies benefit, but debt-reliant states face greater imbalances. These suggest the need for fiscal coordination.
A key limitation is the absence of comparisons with similarly structured economies in other regions such as Asia or Latin America. Adding such cases could offer useful contrasts in how institutions and regional settings influence spillovers and policy transmission.
This study advises against a rushed move toward an African Monetary Union. Instead, a stepwise approach, centered on financial deepening, macroeconomic stability and stronger institutions are vital to reducing asymmetries and building the groundwork for effective monetary union.
This is the first study to apply a GVAR approach to structurally clustered African economies. By shifting the focus from geography to structural characteristics, it presents fresh evidence on how diverse economic foundations shape Africa’s readiness for monetary integration.
