Capital Markets in Africa and the Impact of Tapering

Newly-formed African capital markets face some serious constraints heading into 2014. The Federal Reserve is planning on starting its tapering, a reduction of its quantitative easing policy, in January.  Quantitative easing has played a role in increasing the demand for emerging and frontier capital market products because of the higher return on these products compared to developed country bonds. 

In the face of tapering of quantitative easing by the Fed, the MSCI emerging market stocks index has fallen 6.4 percent in 2013, the steepest annual drop since 2011. In addition to tapering, China is starting to experience a slowdown of its economy, which might interfere with the demand for the commodities that have fueled some of the growth in sub-Saharan Africa.

Brookings Nonresident Senior fellow Vera Songwe discusses the impacts of tapering on African economies and offers advice to African economic policymakers on how to keep investors interested in Africa’s capital markets going forward.

Read the related paper »

Read Foresight Africa 2014

, which details the top priorities for Africa in the coming year, to learn more about challenges and opportunities for capital markets in Africa

and other critical issues for the region.