The Great Financial Crisis: How Effective is Macroeconomic Policy Response in the United Kingdom?
21 Jan 2016-International Journal of Finance & Banking Studies (Hasan Dincer)-Vol. 4, Iss: 2, pp 1-10
TL;DR: In this paper, the authors reviewed the various policy measures adopted by the Bank of England from the inception of the financial crisis in 2008 and assesses their effectiveness in bringing back the economy from the brink of collapse.
Abstract: The Great Financial Crisis has been touted to be the worst crisis since the Great Depression of 1930; its effect has profound ramifications on the global economy. The nature and the severity of the crisis provoked an unprecedented policy response from policy makers at both global and domestic levels. To address the rampaging crisis, the Bank of England implemented a number of conventional and unconventional policy measures to curtail the economic rot and to stimulate economic growth. There is a broad consensus in the empirical literature and other evidence found in this paper that a number of the policies implemented in the United Kingdom played a significant role in re-directing and stimulating the economy. This paper reviews the various policy measures adopted by the Bank of England from the inception of the financial crisis in 2008 and assesses their effectiveness in bringing back the economy from the brink of collapse. Our review shows that quantitative easing (QE) policy and the expansionary fiscal policy adopted by the Bank of England were effective policy tools used in stimulating economic growth, stemming the effect and shortening the duration of the crisis in the United Kingdom
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15 Jul 2005
TL;DR: The Office for National Statistics (ONS) lies at the center of the United Kingdom Government Statistical Service as discussed by the authors, which collects and analyses data from a wide variety of sources, and publishes and interprets the statistics.
Abstract: The Office for National Statistics (ONS) lies at the center of the United Kingdom Government Statistical Service. In partnership with other government departments, ONS aims to provide “the main statistical advisory service for policy formulation, resource allocation, planning, and research on the number, characteristics and health of the population. It collects and analyses data from a wide variety of sources, and publishes and interprets the statistics. Major customers are government, business, researchers and the general public.”
Keywords:
government;
policy;
planning;
population;
longitudinal;
fertility;
cancer
7 citations
TL;DR: In this article, the authors assess ex ante the potential impacts of implementing the new Banking recovery and resolution directives on Europe's TBTF banks and assess the potential impact of these directives on European banks.
Abstract: The great recession heralded in by the subprime mortgage crisis, took a dramatic turn for worse as a result of collapse of the Lehman Brothers bank in September 2008. The crisis deemed to be the most devastating after the Great Depression of 1929, had a debilitating effect on world economies, developing and advanced alike. The extent of its devastation which is still being felt in Europe and many parts of the globe reminds us the interconnectedness of financial institutions, particularly those tagged TBTF or SIFIs. Policy makers scrambled to curtail the ugly effect of the crisis by rescuing the SIFIs within their jurisdiction largely through bailout mechanism and provision of implicit guarantee for the debts of failing/failed institutions. As soon as the tide is stemmed, they cast their gaze on new crisis resolution and recovery measures that could rein in systemic risks associated with SIFIs, prevent future crises and reduce the concomitant moral hazards in the current resolution measures. The objective of this paper is to assess ex ante the potential impacts of implementing the new Banking recovery and resolution directives on Europe’s TBTF banks.
1 citations
Cites background from "The Great Financial Crisis: How Eff..."
...The impact of financial crisis on SIFIs is not limited to funding, capital, liquidity and growth; a number of studies have shown that the crisis also has a significant effect on bank operational losses (see, Cope and Carrivick 2013; Akinsoyinu, 2015). Others include Belas (2013) who finds that the low level of satisfaction and loyalty of bank employees during financial crisis is transferred to the low acceptance rate of customer need to sell bank’s products particularly in Slovakia, which has led to a decline in the overall customer satisfaction....
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...The impact of financial crisis on SIFIs is not limited to funding, capital, liquidity and growth; a number of studies have shown that the crisis also has a significant effect on bank operational losses (see, Cope and Carrivick 2013; Akinsoyinu, 2015)....
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References
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TL;DR: This Time Is Different as mentioned in this paper presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes.
Abstract: Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, "this time is different"--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much--or how little--we have learned. Using clear, sharp analysis and comprehensive data, Reinhart and Rogoff document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. They examine the patterns of currency crashes, high and hyperinflation, and government defaults on international and domestic debts--as well as the cycles in housing and equity prices, capital flows, unemployment, and government revenues around these crises. While countries do weather their financial storms, Reinhart and Rogoff prove that short memories make it all too easy for crises to recur. An important book that will affect policy discussions for a long time to come, This Time Is Different exposes centuries of financial missteps.
4,595 citations
01 Dec 2011
886 citations
"The Great Financial Crisis: How Eff..." refers background in this paper
...Financial crises are not a recent phenomenon, it is a regular occurrence with similar causes (Reinhart and Rogoff (2009); and the United Kingdom is not a stranger to economic crises, its economy has survived many of the worst economic crises in history started with the Panic of 1857....
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...Source: National Audit Office Financial crises are not a recent phenomenon, it is a regular occurrence with similar causes (Reinhart and Rogoff (2009); and the United Kingdom is not a stranger to economic crises, its economy has survived many of the worst economic crises in history started with the…...
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01 Jan 2009
TL;DR: In this paper, the authors make a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected and make their origins in economic policies followed in a number of countries in the 1990s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets.
Abstract: This paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both have their origins in economic policies followed in a number of countries in the 2000s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets. In the U.S., the interaction among the Fed’s monetary stance, global real interest rates, credit market distortions, and financial innovation created the toxic mix of conditions making the U.S. the epicenter of the global financial crisis. Outside the U.S., exchange rate and other economic policies followed by emerging markets such as China contributed to the United States’ ability to borrow cheaply abroad and thereby finance its unsustainable housing bubble. *University of California, Berkeley, and Harvard University. Paper prepared for the Federal Reserve Bank of San Francisco Asia Economic Policy Conference, Santa Barbara, CA, October 18-20, 2009. Conference participants and especially discussant Ricardo Caballero offered helpful comments. We thank Alexandra Altman and Matteo Maggiori for outstanding research assistance. Financial support was provided by the Coleman Fung Risk Management Center at UC Berkeley and CEPREMAP.
515 citations
TL;DR: In this paper, the effects of the Federal Reserve's program to purchase $300 billion of U.S. Treasury coupon securities announced and implemented during 2009 were analyzed using a panel of daily CUSIP-level data.
Abstract: Using a panel of daily CUSIP-level data, we study the effects of the Federal Reserve’s program to purchase $300 billion of U.S. Treasury coupon securities announced and implemented during 2009. This program represented an unprecedented intervention in the Treasury market and thus allows us to shed light on the price elasticities and substitutability of Treasuries, preferred-habitat theories of the term structure, and the ability of large-scale asset purchases to reduce overall yields and improve market functioning. We find that, except for very long maturities, purchase operations caused an average decline in yields in the sector purchased of 3.5 basis points on the days when they occurred (the “flow effect” of the program). In addition, the program as a whole resulted in a persistent downward shift in the yield curve of as much as 50 basis points (the “stock effect”), with the largest impact on zero-coupon yields around the 5-year sector. The coefficient patterns generally support a view of segmentation or imperfect substitution within the Treasury market at the time of the program announcement and implementation.
441 citations
TL;DR: In this paper, the authors assess the impact of the Bank of England's quantitative easing policy on asset prices and find that the largest part of the impact came through a portfolio rebalancing channel.
Abstract: As part of its response to the global banking crisis and a sharp downturn in domestic economic prospects, the Bank of England’s Monetary Policy Committee (MPC) began a programme of large-scale asset purchases (commonly referred to as quantitative easing or QE) in March 2009, with the aim of injecting additional money into the economy and so increasing nominal spending growth to a rate consistent with meeting the CPI inflation target in the medium term. By February 2010, the MPC had made £200 billion of purchases, most of which had been of UK government securities (gilts). Based on analysis of the reaction of financial market prices and econometric estimates, this paper attempts to assess the impact of the Bank’s QE policy on asset prices. Our estimates of the reaction of gilt prices to the programme suggest that QE may have depressed gilt yields by about 100 basis points. On balance the evidence seems to suggest that the largest part of the impact of QE came through a portfolio rebalancing channel. The wider impact on other asset prices is more difficult to disentangle from other influences: the initial impact was muted but the overall effects were potentially much larger, though subject to considerable uncertainty.
431 citations