TITLE:
Spillover Effects in the Financial Markets among the Countries of the Central African Economic and Monetary Community (CEMAC)
AUTHORS:
Antoine Ngakosso, Francois Likondzabeka
KEYWORDS:
Financial Contagion, Interdependence, Interbank Market, Non-Linear Error Correction Model (ECM), Asymmetry, CEMAC Zone, Macroprudential Regulation
JOURNAL NAME:
Theoretical Economics Letters,
Vol.16 No.5,
October
28,
2026
ABSTRACT: This article examines whether and how financial contagion effects exist in the CEMAC banking sector during 1995-2024. Unlike traditional studies on stock markets, this paper uses logged banking development indicators to measure systemic risk perception in Cameroon, Central African Republic, Republic of Congo, Gabon, Chad and Equatorial Guinea. Unit root tests (ADF, PP, KPSS) and an asymmetric non-linear ECM (Ayadi et al., 2006) are used as well as a GARCH(1,1) specification to correct for heteroscedasticity bias in high and medium frequency data. The empirical results reject the linearity hypothesis of transmission mechanisms and show pure and asymmetric banking contagion in the CEMAC zone. Short-term adjustment behaviour is very different between stability and crisis periods (sharp amplification of interbank co-movements during stress). These structural vulnerabilities imply that COBAC and BEAC need non-linear macroprudential policies such as countercyclical capital requirements and a central counterparty clearing house to reduce domino effects at the regional level.