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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 at Oxford by members of the International Growth Centre (IGC), funded by the Economic and Social Research Council (ESRC) and the Department for International Development (DFID), has played an important role in shaping two key areas of monetary and exchange rate policy formulation in East Africa.
Research on food prices and inflation in Tanzania is providing the technical basis for the discussions of the Monetary Policy Committee (MPC) of the Bank of Tanzania, and has contributed to current thinking by the African Development Bank (ADB) on policy responses to global food price volatility in East Africa.
Work on exchange rate policy has helped shape the Draft Protocol on East African Monetary Union currently being negotiated between the East African Community (EAC) partner states (Kenya, Uganda, Tanzania, Rwanda and Burundi).
Professor Ronald MacDonald has developed leading research and economic models for applied exchange rate analysis. This body of work has underpinned training and capacity-building at the IMF Institute in Washington DC, reaching approximately 250 economists and policy-makers of financial institutions from around the world. Additionally, the research has formed the basis of advice to government agencies, such as the General Secretariat for Development Planning Qatar in 2008.
MacDonald's work has been cited by central bankers and IMF economists in working papers and his expertise led to his being appointed Monetary Advisor for the IMF. In this capacity, he has provided research-driven analysis and recommendations to central banks on their approaches to exchange rate regimes, with one notable example being the Central Bank of Costa Rica in 2010.
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.
Paul De Grauwe developed and tested the theory that financial markets in the Eurozone can push countries into a vicious circle of economic recession, increasing government debt levels and banking crises in a self-fulfilling way. One of the main policy conclusions of this analysis is that the European Central Bank (ECB) is the only institution that can prevent countries from being pushed into such a vicious circle. This can be achieved by the ECB becoming the lender of last resort in the government bond markets of the Eurozone.
After much hesitation the ECB accepted this analysis and decided in September 2012 to become the lender of last resort in the government bond markets of the Eurozone. It called this "Outright Monetary Transactions" (OMT). This decision was of great importance and led to a quick stabilization of the government bond markets in the Eurozone. De Grauwe's research influenced this policy reform as well as the wider policy debate on reform of Eurozone governance.
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.
Professor Richard Caplan's research explores the challenges that arise in the context of post- conflict peace- and state-building. His work on exit strategies and peace consolidation led the UN Peacebuilding Support Office (PBSO) to ask him to examine specific challenges to designing and implementing transitional strategies in peace operations, and to suggest how these challenges could be met more effectively. This work initiated a process within the UN to introduce more rigorous benchmarking practices for peacebuilding, laid the foundations for the development of a common UN methodology for measuring peace consolidation and played an instrumental role in the production of a United Nations handbook on peace consolidation monitoring, entitled Monitoring Peace Consolidation - United Nations Practitioners' Guide to Benchmarking (United Nations, 2010). The handbook is being used to support practitioners engaged in peacebuilding across the UN system.
This research has influenced a shift in the international framework for tackling the proceeds of crime. It helped to move state practice away from a focus on formal compliance with the international rules to an emphasis on effectiveness and enforcement. Gilmore's monographs on Dirty Money (1995-2004) and appointments with the Council of Europe (CoE) — the body charged with coordinating government responses to money laundering — established a direct conduit for the uptake of research by transnational regulators. States regulated through CoE standards now focus intensively on confiscation of the proceeds of crime rather than on formal criminalisation of related activities.