The level of African forex markets integration and Eurobond issue

In this paper, we examine the comovements and volatility spillovers of four US dollar exchange rates for four African currencies in the period of the Sub-Saharan African Eurobond issue. The currencies considered are the US dollar exchange rates for the Ghana Cedi (GHS), Nigeria Naira (N), The Kenyan Shilling, and the South African Rand (ZAR). We considered exchange rate data from 2006 (the year the first Eurobond was issued by Seychelles on the SSA) to January 2021. This period is divided into three subperiods, which are the period of Light Eurobond Issue, the Period of Heavy Eurobond Issue, and the Period of Global Financial Crisis (GFC). We observe different correlation dynamics and volatility spillovers across the period of our study. Specifically, significant comovements and volatility spillovers were recorded in the Light Eurobond Issues and the Global Financial Crisis Period. The conditional correlation and the volatility spillovers are not well pronounced in the Heavy Eurobond Issue Period. This implies that individual currency US dollar exchange rates are behaving idiosyncratically. The findings provide diversification opportunities for forex market players and investors looking into the African continent.