Monetary policy and its effect on the wider economy are important for
South Africa's objective of
achieving both high economic growth and low inflation — which are deemed
to contribute to the
government's and electorate's greater objectives of reducing poverty and
The central bank (South African Reserve Bank, SARB) and the National
responsibility for both monetary policy and the oversight of the financial
sector. Laurence Harris's
research on the links between monetary policy, financial sector
development, and their connection
with the financing and investment decisions made by businesses has led
both institutions to seek
and act on his advice.
The Personal Finance Research Centre (PFRC) at the University of Bristol
conducted research between 2004 and 2006 to develop the UK's first
quantitative baseline survey of financial capability. The survey was a
significant departure from previous methodologies in that it not only
assessed knowledge, but also skills and behaviours. The survey results
became the basis for the Financial Services Authority's (FSA)
understanding of financial capability in the UK, and PFRC's analysis of
the survey findings were used to set priorities for its National Strategy
for Financial Capability, worth £90 million. One of the findings of the
survey was that young people are much less financially capable than their
elders. As a result, a priority within the National Strategy was to
educate young people. A number of programs were put in place including Learning
Money Matters, which offered free advice, support and resources to
schools between 2006 and 2011. The program successfully reached over 2
million young people in 4,259 schools, and in 2011 economic wellbeing and
financial capability became a statutory part of school curriculum in
England. Overall, the FSA strategy was deemed successful, exceeding its
target of reaching 10 million people. International bodies regard the
FSA's baseline survey as a model for their own work and the UK methodology
has been adopted by countries including Ireland, Canada and the
Netherlands. The World Bank has led a substantial research and evaluation
programme in low and middle income countries that uses the UK approach.
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.
Loughborough University research into financial regulation has had a
significant and enduring influence on how regulatory bodies are structured
and how they use economic analysis. This work has been credited with
shaping the groundbreaking culture and methodology of financial regulation
in the UK with respect to consumer protection, recognising the special
characteristics of retail financial products and contracts and applying
cost-benefit and regulatory impact analysis in decision-making processes.
It has also played a major role in redefining financial regulatory
structure in the UK and South Africa. In addition, the research is now
being used to help develop and guide approaches to ensuring high standards
of bank regulation and consumer protection across the EU through the
European Banking Authority's Banking Stakeholder Group.
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.
The Personal Finance Research Centre (PFRC) at the University of Bristol
conducted a major research programme that shaped UK financial inclusion
policy and informed research and policy internationally. PFRC carried out
seminal research to measure the level and nature of financial exclusion in
the UK. Subsequent studies looked at ways of improving access to banking,
credit, insurance and savings that could reduce the `poverty premium' paid
by low-income households. PFRC's research directly informed UK central
government policy which resulted in the successful achievement of a shared
government-banking industry target to halve the number of adults in
households without a bank account (from two million to 890,000) and
funding to extend affordable credit union loans and savings products to an
additional one million low-income people.
Since the financial crisis of 2007-8, many failing banks have had to be
rescued. Rescue has taken different forms, including acquisition by
rivals, public subsidies, and nationalisation.
Research at University of Leicester contributed to the changing of
perceptions on the relative merits of these options, by showing that the
cost of bank nationalisation had previously been over-estimated. This work
paved the way for a wave of bank nationalisations that occurred during the
financial crisis of 2007-8. Demetriades directly applied the
findings of his research in the rescue of the crisis-hit Cypriot banking
sector, following his appointment as Governor of the Central Bank of
Cyprus and member of the European Central Bank governing council in 2012.
The funding of innovative SMEs is widely recognised to suffer from market
failures and has been an area of policy concern since the 1930s. Sussex
research has contributed significantly to understanding the underlying
causes of these market failures, particularly for innovative firms in the
UK and EU. It has placed stronger emphasis, than was the case in the past,
on addressing demand -, rather than supply-side constraints (caused by the
limited number of UK firms capable of generating commercial returns). This
enables it to contribute towards the design and implementation of more
effective equity support.
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.