20240516-IMF-Echoes_Across_Borders_Macroeconomic_Spillover_Effects_of_Conflict_in_Sub-Saharan_Africa_38页_1mb

Echoes Across Borders: Macroeconomic Spillover Effects of Conflict in Sub-Saharan Africa

This paper quantifies the economic impact of conflict spillovers across Sub-Saharan Africa using a new Conflict Spillover Index, highlighting increased spillovers since 2011 with significant heterogeneity. The analysis shows substantial negative effects on GDP growth and inflation, persistent declines in private investment, and increases in government spending and debt. Key transmission channels include trade, with imports rising sharply, and foreign direct investment declining marginally. State-dependencies are crucial, with adverse effects attenuated in settings with strong governance, ample fiscal space, and foreign aid, while exacerbated in weaker institutions and constrained budgets.

Impulse response functions indicate persistent negative impacts on economic growth, inflation, and investment from spillover shocks. The study emphasizes that better governance, fiscal buffers, and targeted foreign aid can mitigate these effects, while poor governance and limited fiscal space amplify vulnerabilities. Policy implications include strengthening national fiscal strategies, enhancing regional coordination for humanitarian needs, and investing in governance reforms to foster resilience against cross-border conflict spillovers.