Questions and answers about coronavirus and the UK economy

Banks & financial markets

Data: The vaccine and the stock market

Figure showing Pfizer & AstraZeneca share prices Read more

How is coronavirus affecting the insurance industry?

Covid-19 has caused severe disruption for insurance companies, not least as they are in the business of pricing risks and a pandemic was thought of as a low probability event. But the economic fallout from the crisis may act as a catalyst for positive change in the industry.

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How might costly sovereign debt default in emerging economies be averted?

Many low- and middle-income countries face problems servicing their external debts while tackling the global health emergency and the ensuing economic damage. To ensure debt sustainability, the existing stock of debt needs to be restructured, potentially involving substantial debt write-downs.

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Why has the stock market bounced back when the economy seems so bad?

The economy is suffering as a consequence of Covid-19 and measures taken to contain it, yet share prices have been rising sharply. This raises the possibility that the stock market is now in a bubble, with valuations increasingly detached from business and economic fundamentals.

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Could a national investment bank support recovery from the Covid-19 crisis?

The unprecedented challenges brought by coronavirus will require an investment-led recovery at a time when confidence in the economy is weak. The establishment of a national investment bank could foster a more positive climate for growth, promoting innovation, employment and improved productivity.

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How are firms in emerging markets reacting to the coronavirus crisis?

Firms in emerging markets have suffered at least as much from Covid-19 as those in advanced economies. Evidence suggests that they have cut investment rather than laying-off staff. They have also been flexible with suppliers and business partners, and tried to support their communities.

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How will coronavirus affect occupational pensions?

The recent volatility of financial markets and the monetary policy response to the Covid-19 crisis have led to renewed concerns about the funding of occupational pensions. The impact will be felt by scheme sponsors and members – and in the viability of the Pension Protection Fund.

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How will coronavirus change the global microfinance industry?

Unlike previous crises that the microfinance industry weathered successfully, Covid-19 has created significant challenges for both the demand side – low-income borrowers struggling to repay their microloans – and the supply side – providers facing their own funding pressures.

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Will coronavirus accelerate the move towards a cashless economy?

The use of cash fell substantially in the early days of the Covid-19 pandemic with the acceleration in online shopping and contactless payments – but cash usage has bounced back as lockdown has eased. Long-term prospects for retail payments remain uncertain.

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Should the Bank of England use negative interest rates in response to the crisis?

In the last decade, people in the UK have grown used to historically low interest rates. But imagine putting £100 in the bank and then, a year later, having £99 because your interest rate is negative 1%. Why might this happen, is it imminent, and would it help the economy?

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How is coronavirus affecting the banking sector?

While the banking sector will be negatively affected by the pandemic, it is also critical for economic recovery. But the crisis will strengthen competitive pressures on banks by accelerating trends towards digitalisation and new financial service providers.

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Is the banking sector safer than during the global financial crisis?

Stress tests of major banks in 2019 suggested that the sector was sufficiently capitalised and had enough liquidity to withstand big economic shocks and continue to meet the financing needs of households and firms. But is it safer than 10 years earlier? And is it safe enough to cope with economic damage from coronavirus?

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How do changes in asset prices affect the real economy?

There were big falls in share prices well before we grasped the likely severity of the pandemic and the economic impact of coronavirus. So what are the interactions between asset prices and economic activity – and what might price changes imply for future output growth?

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Risk in the time of Covid-19: what do we know and not know?

Coronavirus has exposed the world’s population to an extreme degree of uncertainty in all dimensions of life. How does this unprecedented global event influence our risk-taking – and how can we measure it reliably?

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What explains stock market reactions to the pandemic?

Share prices around the world fell dramatically earlier this year amid fears about the financial implications of the pandemic, but since then prices have recovered around half of their losses. How can we explain what has been happening on the stock market?

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Funded by

UKRI Economic and Social Research Council
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