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Stock markets integration, intra-African trade and welfare in selected African countries
Thesis (PhD)--Stellenbosch University, 2025.
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Stellenbosch : Stellenbosch University
2025
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| access_status_str | Open Access |
| author | Zimuto, Wisdom |
| author2 | Nanziri, Lwanga Elizabeth |
| author_browse | Nanziri, Lwanga Elizabeth Zimuto, Wisdom |
| author_facet | Nanziri, Lwanga Elizabeth Zimuto, Wisdom |
| author_sort | Zimuto, Wisdom |
| collection | Thesis |
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Thesis (PhD)--Stellenbosch University, 2025. |
| format | Thesis |
| id | oai:scholar.sun.ac.za:10019.1/132307 |
| institution | Stellenbosch University (South Africa) |
| language | en_ZA |
| last_indexed | 2026-06-10T12:40:50.669Z |
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| provenance_str_mv | Harvested via OAI-PMH from SUNScholar — Stellenbosch University Repository |
| publishDate | 2025 |
| publishDateRange | 2025 |
| publishDateSort | 2025 |
| publisher | Stellenbosch : Stellenbosch University |
| publisherStr | Stellenbosch : Stellenbosch University |
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| source_str | SUNScholar — Stellenbosch University Repository |
| spelling | oai:scholar.sun.ac.za:10019.1/132307 Stock markets integration, intra-African trade and welfare in selected African countries Zimuto, Wisdom Nanziri, Lwanga Elizabeth Stellenbosch University. Faculty of Economic and Management Sciences. University of Stellenbosch Business School. Economic development -- Africa Banks and banking -- Africa Stock exchanges -- Africa Econometric models -- Africa Economic policy -- Africa UCTD Thesis (PhD)--Stellenbosch University, 2025. Zimuto, W. 2025. Stock Markets Integration, Intra-African Trade and Welfare in Selected African Countries. Unpublished doctoral dissertation. Stellenbosch: Stellenbosch University [online]. Available: https://scholar.sun.ac.za/items/012646fa-d04f-4a9f-9186-dda5d1c3c43c ENGLISH SUMMARY: This study revisits an old debate on the role of financial markets development in the real economy and in enhancing welfare outcomes, the focus being Africa’s stock markets. The finance-growth nexus holds that the financial sector, of which the stock markets are a subset, is responsible for the growth of the economy. Proponents argue that the expansion of the economy is the primary factor that determines the development of the stock market, while a different school of thought argues that the real economy and the financial sector both have an effect on each other that works in both directions. Some opposing viewpoints on the link between economic growth and the stock markets posit that financial markets have no effect on the "real economy." This conflicting point of view is founded on the speculative behaviour of investors, which drives changes in share prices that cannot be rationalised by reference to the underlying fundamentals of the economy. African countries liberalised their financial sectors to attract the much-needed financial resources, leading to the establishment of the majority of stock markets from mid 1980s to late 1990s. Simultaneously, the world became a global village, leading to the integration of financial markets, especially in developed countries. The argument was that economies would work together towards a common goal through technology, trade, and investment. For the financial sector, globalisation would lead to the mobilisation of capital needed by the private sector, with spillover benefits for households. Indeed, integrated financial markets lead to more liquidity, more alignment of local markets returns with the world market returns, lower cost of capital and increased economic growth. After decades of financial sector liberalisation and globalisation, it is safe to assume that countries have realised some of these benefits. This thesis, therefore, aims to investigate the degree of stock markets integration in Africa, the extent to which this integration can boost trade in the spirit of the new African Continental Free Trade Arrangement, and if there are welfare benefits from this integration. Such an analysis is important given the objectives of African Union’s Agenda 2063 and the slow pace at which Africa is moving towards achieving the targets of the United Nation’s Sustainable Development Goals. Firstly, the study constructs a measure of stock market integration to profile the extent of integration of African stock markets. Empirical studies profiling the state of stock market integration have focussed on developed and emerging market economies, mostly applying parametric methods. Africa’s pursuit of financial liberalisation policies followed empirical studies on how stock markets in Africa are integrated with the global markets, but less is known about how African stock markets are integrated with each other. The study applies a non-parametric method of continuous wavelet coherence analysis to profile the patterns of stock market integration in different major world economic and political events from 2006 to 2021. The results show long-run integration over the entire sample period, and both long and short-run integration during three crises namely the global financial crisis, the Arab Spring in Egypt and countries that share strong economic ties with it, and the COVID-19 pandemic. Secondly, the stock markets integration-trade nexus is analysed. Theory suggests that stock markets integration influences trade through the channels of financial intermediation, portfolio balancing in different markets, investments, and movement of goods and services. Using the gravity model and the integration relationship established in Chapter 2, the results show that stock markets integration positively influences intra-African trade. Finally, and in line with the global call to end poverty, the study investigates whether stock markets integration has a bearing on welfare within Africa. The unabated rise in income inequality, especially in Africa, and the recognition of income inequality as the tenth goal among the seventeen Sustainable Development Goals adopted by the United Nations in 2015, make income inequality an appropriate candidate as a measure of welfare. Empirical studies show that stock market integration is associated with reversal of international capital flows from developing countries to developed countries, exacerbating income inequality between poor and rich countries, but less is known about how integration of stock markets between developing countries can influence the gap between the rich and the poor. Using the Feasible Generalised Least Square technique on selected African countries from 2010 to 2020, the results show that stock market integration reduces income inequality. Overall, this study demonstrates a sustained long-run integration of stock markets, leading to positive trade outcomes reduced income inequality. These results call for further improvement in the depth of stock markets in Africa, which can lead to improved short-run integration and welfare enhancement. AFRIKAANSE OPSOMMING: Hierdie studie herbesoek 'n bestaande debat oor die rol van die ontwikkeling van finansiele markte in die werklike ekonomie en in die verbetering van welvaartsuitkomste, met die fokus op Afrika se aandelemarkte. Die finansies-groei nexus hou die finansiele sektor, waarvan die aandelemarkte 'n subset is, verantwoordelik is vir die groei van die ekonomie. Voorstanders voer aan dat die uitbreiding van die ekonomie die primere faktor is wat die ontwikkeling van die aandelemark bepaal, terwyl 'n ander denkrigting aanvoer dat die werklike ekonomie en die finansiele sektor albei 'n effek op mekaar het wat in beide rigtings werk. Sommige teenstellende sienings oor die skakel tussen ekonomiese groei en die aandelemarkte beweer dat finansiele markte geen effek het op die "werklike ekonomie" nie. Hierdie teenstrydige standpunt is gegrond op die spekulatiewe gedrag van beleggers, wat veranderinge in aandelepryse dryf wat nie deur verwysing na die onderliggende fundamente van die ekonomie gerasionaliseer kan word nie. Afrika-lande het hul finansiele sektore geliberaliseer om die broodnodige finansiele hulpbronne te lok, wat gelei het tot die totstandkoming van die meeste aandelemarkte vanaf die middel van die 1980's tot die laat 1990's. Terselfdertyd het die wereld 'n globale dorp geword, wat daartoe gelei het dat finansiele markte wereldwyd geintegreer het, veral in ontwikkelde lande. Die argument was dat ekonomiee saam sou werk om 'n gemeenskaplike doel te bereik met tegnologie, handel en belegging. Vir die finansiele sektor sou globalisering lei tot die mobilisering van kapitaal wat deur die privaatsektor benodig word, met deurvloei voordele vir huishoudings. Werklik, geintegreerde finansiele markte lei tot meer likiditeit, 'n meer gelyke uitkoms van plaaslike markte met wereldmarkuitkomste, 'n laer kapitaalkoste en verhoogde ekonomiese groei. Na dekades van finansiele sektor liberalisering en globalisering is dit veilig om aan te neem dat lande van hierdie voordele bewus is. Hierdie tesis beoog dus om die mate van aandelemark-integrasie in Afrika te ondersoek, die mate waartoe hierdie integrasie handel kan stimuleer, in die gees van die nuwe Afrika-kontinentale vryehandelsooreenkoms, en of daar welvaartsvoordele uit hierdie mark-integrasie is. Sulke analises is belangrik in die lig van die doelwitte van die Afrika-unie se Agenda 2063 en die gematigde tempo waarteen Afrika beweeg om die doelwitte van die Verenigde Nasies se Volhoubare Ontwikkelingsdoelwitte te bereik. Eerstens konstrueer die studie 'n maatstaf van aandelemark-integrasie om die mate van integrasie van Afrikaanse aandelemarkte te bepaal. Empiriese studies wat die toestand van aandelemark-integrasie beskryf, het gefokus op ontwikkelde en opkomende mark-ekonomiee, meestal deur parametriese metodes toe te pas. Afrika se strewe na finansiele liberaliseringsbeleide het gevolg op empiriese studies oor hoe aandelemarkte in Afrika geintegreer is met die wereldmarkte, maar minder is bekend oor hoe aandelemarkte in Afrika met mekaar geintegreer is. Die studie pas 'n nie-parametriese metode van kontinue golfletkoherensie-analise toe om die patrone van aandelemark-integrasie in verskillende belangrike wereld-ekonomiese en politieke gebeure tussen 2006 tot 2021 te beskryf. Die resultate toon langtermyn-integrasie oor die hele steekproefperiode, en beide lang- en korttermyn-integrasie gedurende drie krisisse, naamlik die globale finansiele krisis, die Arabiese Lente vir Egipte en lande wat sterk ekonomiese bande daarmee deel, en die COVID-19-pandemie. Tweedens word die aandelemark-integrasie-handels nexus ontleed. Teorie suggereer dat aandelemark-integrasie handel beinvloed deur die kanale van finansiele bemiddeling, portefeuljebalansering in verskillende markte, beleggings, en beweging van goedere en dienste. Deur die gravitasie-model en die integrasie-verhouding wat in die tweede dokument vasgestel is, te gebruik, toon die resultate dat aandelemark-integrasie 'n positiewe invloed het op intra-Afrika handel. Laastens, en in lyn met die wereldwye oproep om armoede te beeindig, ondersoek die studie of aandelemark-integrasie 'n invloed het op welvaart binne Afrika. Die onophoudelike styging in inkomste-ongelykheid, veral in Afrika, en die erkenning van inkomste-ongelykheid as die tiende doelwit onder die sewentien Volhoubare Ontwikkelingsdoelwitte wat deur die Verenigde Nasies in 2015 aanvaar is, kwalifiseer inkomste-ongelykheid as 'n goeie kandidaat-maatstaf vir welvaart. Empiriese studies toon dat aandelemark-integrasie geassosieer word met 'n omkeer van internasionale kapitaalvloei van ontwikkelende lande na ontwikkelde lande, wat inkomste-ongelykheid tussen arm en ryk lande vererger, maar minder is bekend oor hoe integrasie van aandelemarkte tussen ontwikkelende lande die gaping tussen die ryk en die arm kan beinvloed. Deur die FGT-tegniek op geselekteerde Afrika-lande vanaf 2010 tot 2020 te gebruik, toon die resultate dat hoewel aandelemark-integrasie ekonomiese groei verbeter, hierdie verbetering nie beduidend is nie. Werkloosheid, lewensverwagting en babamortaliteit word egter negatief beinvloed deur aandelemark-integrasie. In die algemeen toon hierdie studie 'n volgehoue langtermyn-integrasie van aandelemarkte, wat lei tot positiewe handelsuitkomste en ekonomiese groei, egter nie genoeg om inkomste-ongelykheid te verbeter nie. Hierdie resultate maak ‘n dringende oproep op die verdere verbetering in die diepte van aandelemarkte in Afrika, wat kan lei tot verbeterde korttermyn-integrasie en welvaartsverhoging. Doctoral 2025-06-03T09:02:57Z 2025-06-03T09:02:57Z 2025-03 Thesis https://scholar.sun.ac.za/handle/10019.1/132307 en_ZA Stellenbosch University xv, 142 pages : illustrations application/pdf Stellenbosch : Stellenbosch University |
| spellingShingle | Economic development -- Africa Banks and banking -- Africa Stock exchanges -- Africa Econometric models -- Africa Economic policy -- Africa UCTD Zimuto, Wisdom Stock markets integration, intra-African trade and welfare in selected African countries |
| title | Stock markets integration, intra-African trade and welfare in selected African countries |
| title_full | Stock markets integration, intra-African trade and welfare in selected African countries |
| title_fullStr | Stock markets integration, intra-African trade and welfare in selected African countries |
| title_full_unstemmed | Stock markets integration, intra-African trade and welfare in selected African countries |
| title_short | Stock markets integration, intra-African trade and welfare in selected African countries |
| title_sort | stock markets integration intra african trade and welfare in selected african countries |
| topic | Economic development -- Africa Banks and banking -- Africa Stock exchanges -- Africa Econometric models -- Africa Economic policy -- Africa UCTD |
| url | https://scholar.sun.ac.za/handle/10019.1/132307 |
| work_keys_str_mv | AT zimutowisdom stockmarketsintegrationintraafricantradeandwelfareinselectedafricancountries |