Title: Financial contagion during the COVID-19 pandemic: the case of African countries

Authors: Imen Zorgati; Faten Albouchi; Riadh Garfatta

Addresses: Higher Institute of Finance and Taxation of Sousse, University of Sousse, Sousse, Sousse, 4000, Tunisia ' Faculty of Economic Sciences and Management of Sousse, University of Sousse, Riyad City, 4023, Sousse, Tunisia ' Faculty of Economic Sciences and Management of Sousse, Accounting and Finance Department, University of Sousse, Sousse, Tunisia; IFGT, University of Tunis El Manar, Tunis, Tunisia, 1068, Tunisia

Abstract: This study investigates pure financial contagion and interdependence as well as the nature of causal relationships between stock markets during the COVID-19 pandemic. We use the daily stock index series of China and African countries namely Tunisia, Egypt, Morocco, Uganda, Kenya, Ivory Coast, Nigeria, South Africa, and Zambia from January 1, 2016 to September 30, 2021.We adopt the cointegration and causality approaches to distinguish cases of pure contagion and interdependence by estimating VAR and VECM models. We find 11 cases of pure contagion, including 7 cases in the short term and four cases in the long term. Moreover, we distinguish 6 cases of financial interdependence including 2 cases in the short term and 4 in the long term. These results provide several implications for investors who seek to diversify their portfolios internationally, and for portfolio managers to predict and minimise market risk. Our findings offer also guidance for regulators and policymakers.

Keywords: Covid-19 pandemic; pure contagion; interdependence; cointegration; causality.

DOI: 10.1504/IJAAPE.2024.135531

International Journal of Accounting, Auditing and Performance Evaluation, 2024 Vol.20 No.1/2, pp.23 - 42

Received: 29 Mar 2022
Received in revised form: 20 Jun 2022
Accepted: 27 Jun 2022
Published online: 18 Dec 2023 *

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