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The effect of macroprudential policies on bank risk in the west African economic and monetary union

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  • Yimbar Joseph Somé

    (BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Relwendé Sawadogo

    (Institut Burkinabè des Arts et Métiers - UJZK - Université Joseph Ki-Zerbo de Ouagadougou = University of Ouagadougou)

Abstract

This paper examines the effect of macroprudential policies (MaPs) on individual bank risk-taking in the West African Economic and Monetary Union (WAEMU) using a panel of 92 banks across seven countries over the period 2005–2021. Using a fixed-effects estimator with lagged and contemporaneous regressors, complemented by a system-GMM estimator as a robustness check, we find that macroprudential tightening significantly reduces individual bank risk. The effect is driven primarily by credit-cycle instruments, which exert a substantially larger stabilizing impact than resilience-oriented tools. MaP effects are also asymmetric: tightening episodes reduce bank risk significantly, while loosening episodes have no measurable impact. Finally, the stabilizing effect of MaPs operates primarily through pan-African banks. These findings carry important policy implications for the design of macroprudential frameworks in monetary unions of low-income countries dominated by African foreign banks.

Suggested Citation

  • Yimbar Joseph Somé & Relwendé Sawadogo, 2026. "The effect of macroprudential policies on bank risk in the west African economic and monetary union," Post-Print hal-05645197, HAL.
    • Handle: RePEc:hal:journl:hal-05645197
    DOI: 10.1016/j.ememar.2026.101501
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