Can Intra-Regional Trade Act as a Global Shock Absorber in Africa?

Abstract

The global financial crisis has reiterated the need for Africa to build resilience to global output shocks. In this paper we examine empirically the role of intra-regional and intra-African trade linkages in being an absorber of the global output shocks in two African regional economic communities. We find that deeper intra-regional and intra-African trade ties have helped the East African Community (EAC) absorb the global output shocks. In contrast, the Southern Africa Custom Union (SACU) region has been less able to cope with global output shocks partly due to weaker regional integration. Intra-regional and intra-African trade with fast-growing economies, together with geographically diversified trade links, can strengthen the capacity to absorb global shocks.