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At Bangor there is an extensive tradition of empirical research addressing the long standing public-policy concern of balancing banking sector market power with regulation. The impact of Professor Molyneux's research during 2008-2013 has been to inform policy formulation surrounding the debate about bank monopoly behaviour and its links to industry efficiency. In particular, his empirical analysis has focused on the use of non-structural (price-cost or/and price-revenue relationships) and structural (concentration ratio) measures of competition (and their links to cost and profit efficiency and various risks). Evidence of the impact and scope of this research is found in the extensive use of these measures in publications by, and policy debate within, a variety of financial organizations at the national, European and international level.
The risk of a systemic crisis and the inability of depositors to monitor how banks are governed are long-standing public policy concerns. Since joining Bangor University in 2008 Professor Klaus Schaeck and collaborators from central banks and international financial organisations have worked to inform the global policy debate on these issues. Specifically, how varying competitive conditions, corporate governance structures and regulatory innovations incentivise the development of safer and sounder banking systems. Notable impacts of Schaeck's research since 2008 include: the use by central banks of his new methodology to gauge banking sector competition; priority change in the policy debate over the structure of bank boards and, in particular, the influence of female executives; and finally heightened policy awareness of the unintended consequences of regulations imposed on troubled or bailed-out banks.
Since the global financial crisis triggered by the collapse of the subprime mortgage market in the United States, a key issue for central banks has been the extent to which they should use monetary policy, along with macroprudential tools, to promote financial stability. University of Manchester (UoM) research has developed small theoretical models, and more detailed quantitative macroeconomic models, to help address this issue. This analytical work has helped to: firstly, influence the policies and operations of several major central banks (Brazil, Turkey and Morocco); and secondly, fuel the debate about global reform of bank regulation in international forums, such as the Financial Stability Board, the Basel Committee on Banking Supervision and annual meetings of central banks from Latin America. Impact has been achieved through presentations to these forums, alongside discussions with senior policymakers from other countries.
Giancarlo Corsetti has a long-term engagement with monetary authorities (the European Central Bank and since 2010 the Bank of England) where his research has had an impact on the development of frameworks for analysing stabilization policies in open economies. Since September 2010, his research has specifically focused on: (a) monetary policy trade-offs between internal objectives and exchange rate misalignment and external imbalances; (b) macroeconomic stabilization with high and variable sovereign risk; (c) the design of a monetary backstop to government debt. The research has had an impact through setting policy research agendas; through the inputs into scenario and econometric analyses; through forming the basis of Giancarlo's contribution to high-level policy seminars and the basis of his training of central bank officers.
Research published between 2003 and 2010 on central bank design has established Sibert as an internationally-recognised authority whose ideas have changed the way that policy makers, academics and the public think about monetary policy committees and have influenced efforts to increase the accountability of these committees and the call to increase female participation, particularly at the Bank of England and the European Central Bank. Recognition of the practical value of this research-based understanding is evident in her 2009 appointment to the newly-formed Icelandic five-member monetary policy committee.
Sibert's research investigates the structure of central banks and monetary policy committees, as well as other decision-making groups, and on how their design affects their performance. In particular, she focuses on how it matters that monetary policy is made by a group rather than an individual and how a monetary policy committee can be designed to produce the best possible outcome for monetary policy. She communicates her research through refereed journal articles, invited publications; policy articles, speeches and opinion pieces.
Research by the School's Centre for Finance, Credit and Macroeconomics (CFCM) on the monetary transmission mechanism has been influential in improving the design, implementation and effectiveness of the monetary policies of a number of central banks, including the Bank of England, Banque de France and the European Central Bank. The research has influenced changes in the way that official monetary aggregates are measured so as to capture the impact of non-bank financial institutions on the money supply and credit availability, and in better understanding of how monetary policy affects different interest rates. This in turn has allowed for improved control by central banks of their policy targets, and for better understanding of the effects of their monetary policies on economic activity and inflation.
Research carried out at the University of Southampton into banking, economic growth and development has made Professor Richard Werner a trusted source of advice for economic policy-makers at the highest level, for example for the Financial Services Authority, the Independent Banking Commission, the International Monetary Fund and the Bank of England. Through articles, books and many media contributions, he has promoted a greater public understanding of economics and the financial crisis. His credit creation analysis has also been adopted by two investment funds in their portfolio management, leading to financial gains for investors, outperforming the FTSE100.
The global financial crisis of 2008 required policy makers to restructure radically banking systems through re-capitalization, essentially injecting capital to the banks. The Unit's research has shown that recapitalization policy has the potential to impose significant costs on the wider economy and on the banking system in particular. This research brings this trade-off to the attention of policy-makers at central banks who will now be better informed about the nature of the associated costs. . Our research outputs enabled some of these policy-makers to decide at which point on the trade-off they might wish to locate their policy choices.
Research by Surrey's Centre for International Macroeconomic Studies (CIMS) has had significant impact on monetary policy in several emerging economies.
This case study highlights impact in Nigeria and Pakistan. Both are important emerging economies: Nigeria is the second largest economy in Africa and ranks 30th by world GDP (adjusted for purchasing power parity), while Pakistan ranks 27th; yet GDP per capita is relatively low in both.
Since 2008, Surrey research has: (1) led to the establishment of a new Centre for Survey Research at the State Bank of Pakistan, collecting data that have directly influenced the Bank's monetary policy; (2) steered reform of the macroeconomic models used by the State Bank and the Central Bank of Nigeria; and (3) helped develop a new approach to monetary policy Nigeria.
The making of monetary policy requires accurate forecasts of key monetary variables, and in particular of the inflation rate. Research conducted by Charemza has led to the development of new methods of forecasting inflation. The relevant information is summarised in a Monetary Policy Indicator (MPI) that can be used to identify the optimal timing of active monetary policy. Since June 2006, the MPI has been applied by the Monetary Policy Council (MPC) of Poland in the process of deciding on the levels of monetary instruments (interest rates and reserve levels). The use of these methods has contributed to Poland's economic stability and helped to ensure unprecedented growth of the Polish economy in the last decade.