Cryptocurrencies and Economic Community of West African States Stock Markets: An Analysis by the DCC-GARCH Model

This article is one of the first to analyze the links between the market of the main cryptocurrencies (bitcoin, ethereum) and the main stock markets of ECOWAS (Note 1) (WAEMU, Ghana, Nigeria). The methodology uses a DCC-GARCH model and a non-linear causality test, over the period 2014-2023. The results highlight the existence of a persistent transmission of volatility going from cryptocurrencies to the WAEMU stock markets and of Ghana and the absence of co-movement between these cryptocurrencies and the Nigerian stock market. This is explained by different portfolio adjustment processes due to different reasons for holding cryptocurrencies. The study recommends that regulators take into account strategies to stabilize cryptocurrency prices with a view to achieving financial stability. Other recommendations concern the strengthening of financial integration between ECOWAS stock markets and the consideration of cryptocurrencies in investors' portfolio allocation strategies.