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Volume 27, Number 1, 2025
Volume 27, Number 1, 2025
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Home / Archives / All Issues / Volume 22, Number 1, 2020
Volume 22, Number 1, 2020 << Back
Journal of Economics and Development, Vol. 22 No. 1, pp. 3-19 | DOI: 10.1108/JED-09-2019-0038

Spillover effects of the US monetary policy normalization on African stock markets

Ebere Kalu; Chinwe Okoyeuzu; Angela Ukemenam; Augustine Ujunwa

Abstract:Purpose
We study the contemporaneous effects of US monetary policy normalization on African stock market using panel data from six African countries.

Design/methodology/approach
Daily data from May 1, 2013 to December 31, 2018 were used in order to accommodate the announcement effects since the US monetary policy normalization announcement was made in May 2013, while the rate hike was in December 2015. The study used the FE, RE and PMG models.

Findings
The results revealed that US 10-year bond yield and Treasury bill rate shocks negatively affect stock prices in Africa. S$P500 shock positively affects African stock prices.The result revealed that the integration of African financial market to the global financial market is a major source of vulnerability. The finding that US Treasury bill rate is a major depressant of the African stock prices reveals the short-termism of foreign polio inflows into African economies.

Originality/value
We provide inexorably insight into the interplay of financial systems globally. It can be useful for the purposes of generalization in developing economies in the shape of African countries. More so, this study could be replicated in another economic bloc or region with the aim of further exposing the far-reaching spillover effects of the US monetary policy normalization.

Keywords:US monetary policy, Spillover effects, Normalization, Africa
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