The effectiveness of macroprudential policies during the Covid-19 pandemic in sub-Saharan Africa

This paper studies the macroprudential response to the Covid-19 pandemic in a set of sub-Saharan African countries and finds evidence of the effectiveness of such measures. In particular, the relaxation of macroprudential requirements is shown to have a positive effect on bank lending. Moreover, the paper sheds light on some lessons for employing macroprudential policies in a crisis. First, timeliness in releasing and eventually tightening the macroprudential requirements appears to have bolstered their effectiveness. Second, macroprudential policies were not used in isolation, and their combination with monetary and other policies at the outset of the pandemic may have enhanced their effectiveness. Third, limitations in the macroprudential toolkit at the authorities' disposal may have affected the countries' capacity to respond.

JEL classification: G01, G18, G21

Keywords: capital flows, CCyB, deposits, fiscal policy, monetary policy, provisions