ESRC-DFID project: financial volatility, macroprudential regulation and economic growth in low-income countries

The project ran from September 2014 to February 2017.


The global financial crisis (2007-2009) highlighted weaknesses in macroeconomic, regulatory policies and market failures. Which contributed to a build-up of systemic risks.

Reform proposals in 2010 led to the adoption of the new Basel III banking standards. Yet, it focused on the implications of volatility for short-term economic stability, not long-term.

Many poor countries have very low resilience to cope with adverse short-term shocks. It's a problem because financial crises have poor long-term effects on development and growth.

The global financial crisis raised some important issues:

  • How does financial volatility affect long-run growth?
  • Can macroprudential rules be detrimental to long-run growth?

Very few contributions attempted to address these issues in a systematic manner.

The project studied the financial volatility, growth and prudential regulation in Sub-Saharan Africa. In order to draw policy lessons for the design of macroprudential rules. 

It focused on Francophone countries for the issues at stake. We expected the nature of the financial arrangements could have important implications. Low and middle-income countries face similar weaknesses in the area of prudential supervision. Aspects of the research have proved to be useful for both types of countries.

Project objectives

The project achieved four objectives:

  1. It contributed to literature in financial volatility and economic growth, and how the macroprudential regulatory rules integrated into Basel III. Especially for developing countries. Such as liquidity and leverage ratios can help mitigate financial volatility on growth. 
  2. Providing evidence on the impact of financial volatility and its determinants on economic growth. Particularly in the case of low-income countries in Sub-Saharan Africa.
  3. Developing case studies for Francophone Sub-Saharan African countries focusing on the links between financial volatility. Including macroprudential regulation and growth, to account for their specific financial regime. Complementing other projects parallel to this one for a broader analysis.
  4. Identifying the practical policy implications of analytical and empirical research. Also, discussing how they differ from the “consensus view”. In financial liberalisation and macroprudential policy (under Basel III) in promoting growth.

Activities included presentations to both academic and policy-oriented people. Including national and international institutions involved in development. Particularly in Sub-Saharan Africa, where policymakers were able to enjoy the lessons from the project.



Principal investigator: 

Lead co-investigator:




Case studies


The completion report and integrated policy briefs have been made available.

Integrated policy briefs

Completion report