Working Paper 198 - Can Intra-Regional Trade Act as a Global Shock Absorber in Africa?

The global financial crisis hasreiterated the need for Africa tobuild resilience to global outputshocks. In this paper we examineempirically the role of intra-regionaland intra-African trade linkages inbeing an absorber of the globaloutput shocks in two Africanregional economic communities. Wefind that deeper intra-regional andintra-African tradeties have helpedthe East African Community (EAC)absorb the global output shocks. Incontrast, the Southern AfricaCustom Union (SACU) region hasbeen less able to cope with globaloutput shocks partly due to weakerregional integration. Intra-regionaland intra-African trade with fast-growing economies, together withgeographically diversified tradelinkages, can strengthen thecapacity to absorb global shocks.