Assessing the Currency Market Integration in the SADC Region amid Global Economic Crises

Mulenga, Richard; Mayondi, Moses; Odongo, Nicholas

doi:.0.0.0

Richard Mulenga, ¹ Moses Mayondi, ² Nicholas Odongo, ³

¹Department of Economics, ZCAS University, Dedan Kamathi RD, Lusaka, Zambia
²Ministry of Finance & National Planning, Solwezi, Zambia
³African Centre for Technology Studies (ACTS), Nairobi, Kenya

Corresponding Author: Richard Mulenga ,Email: richardmulenga2@gmail.com

ABSTRACT

This study examines the real effective exchange rate (REER) market integration among the selected Southern African Development Community (SADC) countries before, during, and after the 2008-2009 Global Financial Crisis (GFC) and the COVID-19 crisis using daily REER data from January 2002 to January 2024. Using an experimental quantitative study design and employing the Johansen cointegration, vector error correction models(VECMs) and the impulse response functions, findings indicate that the currency markets in the SADC region became less integrated during both the GFC and COVID-19 crises, as indicated by less cointegration vectors in the crises relative to pre-GFC and pre-COVID 19 periods. Findings seem to indicate that the COVID-19 shocks were relatively more intense than the GFC shocks. We recommend that the SADC region should incorporate leading indicators and crisis signalling properties in the currency markets, including but not limited to the Baltic Dry Index (BDI), as part of the strategies to hedge against future global crises.

JEL Classification

G15: International Financial Markets
E43: Interest Rates: Determination, Term Structure, and Effects
F15: Economic Integration
F13: Trade Policy; International Trade Organizations

Keywords: currency market integration | real effective exchange rate | SADC region | COVID-19 | Baltic dry index