Abstract:
The impact of the recent global financial crisis on the global economy has highlighted the level of integration of economies and the potential spillover effects as a result thereof. The implications are that the negative effects of the crisis can quickly spread to other economies through numerous transmission mechanisms. The response of developing or emerging economies to these unpredictable exogenous shocks becomes a topical issue. The concepts of economic vulnerability to and resilience against adverse exogenous shocks for emerging economies have since taken centre stage in many economic forums. Policy makers for emerging economies have come to the realisation that the increased economic vulnerability and a lack of economic resilience in their economies can erode the hard-fought-for gains in economic growth over the past decade and potentially harm their prospects as attractive destinations for foreign direct investment (FDI).
This research analysed the resilience and vulnerability of emerging economies against adverse shocks using the sub-Saharan African (SSA) region as a case. The research used previous literature on emerging economies’ vulnerability and resilience to formulate four hypotheses around the major overarching themes of vulnerability and resilience. Two hypotheses looked at two functions of vulnerability, i.e. trade openness and financial integration, and two functions of resilience, i.e. international reserves accumulation and economic concentration.
The findings of this research study were that SSA economies were vulnerable and not resilient against adverse exogenous shocks, and that few economies in the SSA region were prepared to successfully manoeuvre in an economic crisis. The structure of these economies inherently rendered these economies vulnerable. However, these economic structures also allowed the SSA region to achieve the high economic growth experienced during the past decade. The output of the methodology utilised in this research study resulted in a model that can be used to reduce the likelihood of an SSA economy being severely affected by an adverse economic shock.
