The Euro Zone Financial Meltdown and Sub-Saharan Africa’s Financial Sector: Analysis and The Way Forward for Financial Development and Economic Growth

Abstract

The purpose of the paper was to assess the effects of the euro zone financial crisis on sub-Saharan Africa’s (SSA) financial sector. The evidence showed that the euro zone crisis had limited negative effects on SSA financial sector as a whole. However, individual countries were impacted negatively based on their relative integration into the global financial system and the idiosyncratic responses by policy makers to the crisis. The article begins with a historical perspective and underpinning of the euro zone financial crisis. Next, it presents a brief overview of the euro zone financial sector. This is followed by an analysis of SSA’s financial sector and its exposure to the euro zone crisis. The paper then continues with a discussion of the transmission mechanisms of the crisis to SSA’s financial sector. The article ends with an outline of policy lessons learned from the euro debt crisis, policy implications for SSA’s financial sector, and recommendations for the way forward for financial development and stability in SSA.