Globalization and business cycles synchronization in sub-Saharan Africa

Abstract

This study uses data on sub-Saharan African countries for the period from 1988 to 2018 to examine the effects of globalization and its dimensions on business cycles synchronization, while disentangling the de jure aspects from the de facto ones. Globalization is measured by the quasi-correlation coefficient of the KOF globalization indices while business cycles synchronization is measured by the quasi-correlation coefficient of the real GDP cyclical components, and the absolute differential in the real GDP growth rate preceded by the negative sign. We specified a static panel model which is estimated by the Feasible Generalized Least Squares in order to overcome the spatial dependence, heteroscedasticity and errors’ autocorrelation issues. We find that globalization and its dimensions foster the business cycles synchronization in sub-Saharan Africa. The distinction between the de jure and de facto aspects of globalization also shows that both aspects strengthen the business cycles synchronization. Importantly, we mention that beyond economic globalization which is considered as a traditional determinant of the business cycles synchronization, this study shows that social and political globalization also heighten the synchronization of the latter.

KEYWORDS:

• De jure globalization
• De facto globalization
• business cycles synchronization
• cross-sectional dependence
• panel
• sub-Saharan Africa

JEL Classifications:

• E32
• F62
• O11
• O55

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 See Gygli et al. (2019) and Ritzer (2007).

2 See Thieß and Hauke (2020).

3 See UNCTAD (2018, 2019) and Bahia and Delaporte (2020).

4 Diplomatic Dashboard (https://diplodash.pardee.du.edu/), Thieß and Hauke (2020).

5 Feldstein and Horioka (1980) showed the opposite; for these authors, although countries are experiencing significant financial integration, their national investments remain dependent on their national savings.

6 One can mention for instance the 2007–2008 financial crisis which started from the United States (US) to spread to other economies because of the strong financial relationships between them. The crisis diminished the US production and then other countries one. This period experienced the international business cycles co-movement (see Jaffee 2008; Shirai 2009).

7 See Gygli et al. (2019) and Haelg (2020) for existing globalization indices, their limits compared to the KOF globalization index and, details on the index determination and its related dimensions.

8 See Gygli et al. (2019) and Haelg (2020) for the indicators used to compute the sub-indices of de jure and de facto globalization aspects.

9 These are the assumptions of homoscedasticity and the absence of spatial and temporal autocorrelation of the errors which imply that the variance-covariance matrix of the errors is a scalar matrix (σI).