Global Financial Transmission into Sub-Saharan Africa – A Global Vector Autoregression Analysis

Sub-Saharan African countries are exposed to spillovers from global financial variables, but theimpact on economic activity is more significant in more financially developed economies.Generalized impulse responses from a GVAR exercise demonstrate how the CBOE volatilityindex (VIX) and credit conditions around the globe impact a subset of sub-Saharan Africaneconomies and regions. The estimated relationships suggest that the effect of global uncertaintyis more pervasive in exports, with the impact on economic and lending activities being mixed.The channels of transmission include the effects of global financial variables on commodityprices and on trading-partner's macroeconomic and financial variables. The analysis suggeststhat shocks to credit conditions in the euro area and the U.S. have not significantly affected locallending conditions or economic activity in sub-Saharan Africa during 1991-2011, except perhapsin South Africa.