Questions and answers about coronavirus and the UK economy

Prices & interest rates

How can competition authorities tackle price rises in a crisis?

From the outset of the pandemic, there were reports of retailers charging exceptionally high prices for certain products, notably hand sanitiser. Investigations by the Competition and Markets Authority have played an important role in quelling the practice.

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How is coronavirus affecting the UK’s retail sector?

UK retailing has been deeply affected by Covid-19 – but the effects are far from uniform and, to an extent, they are accelerating structural changes already happening. Re-opening has seen some reversal of the damage from lockdown, but the long-term direction of the sector remains unclear.

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Might coronavirus bring a lasting shift to online spending?

Online spending naturally became a bigger share of total UK household consumption during lockdown. While offline spending has risen since restrictions eased, there is early evidence of a ‘new normal’ in which online spending is roughly 25% higher than its pre-pandemic level.

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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 did central banks respond to the coronavirus crisis?

The monetary policy response by three of the world’s major central banks – the Bank of England, the European Central Bank and the US Federal Reserve – has contributed significantly to mitigating the economic consequences of the global pandemic.

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How is coronavirus affecting emerging markets and developing economies?

The output losses in low- and middle-income countries triggered by the Covid-19 crisis are likely to leave long-lasting scars, reducing potential growth. The UK is not insulated from the economic fallout due to trade links and financial exposure.

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What are the fiscal consequences of the UK response to coronavirus?

Bold fiscal policy has aimed to mitigate the collapse in UK economic activity, but the recession makes the public finances more precarious. How can we assess the fiscal consequences of the crisis – and the interplay between fiscal measures and the macroeconomy? 

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After coronavirus, can the housing market support economic recovery?

The UK’s housing market was essentially closed during lockdown with residential moves severely restricted while millions of households were supported with their housing costs and had the threat of eviction removed. What role might the sector play in the recovery?

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Should Modern Monetary Theory inform economic policy in the crisis?

The crisis has led to renewed interest in the analytical foundations and policy implications of Modern Monetary Theory (MMT), an unorthodox approach to the management of monetary and fiscal affairs. MMT is not a safe basis for a programme for economic recovery.

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After coronavirus: deflation or inflation?

Most economists are reasonably confident that once the pandemic has subsided, employment will eventually recover to its previous normal levels. But there are two markedly different schools of thought on the future of inflation: further deflationary pressures or a return to systemic inflation.

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Is the Covid-19 recession caused by supply or demand factors?

UK GDP is falling sharply in part because firms are less able to produce goods and services, and in part because consumers aren’t spending as much. Which mechanisms are the most important – and why does this matter for policy-makers?

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How has coronavirus affected prices in the supermarket?

The Covid-19 pandemic has led to the closure of cafés and restaurants, a big increase in home working and some people engaged in panic buying. This has fed through to an increase in spending in supermarkets and food retailers – and driven up grocery prices.

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What should we do about price gouging?

The prices of a number of products in short supply during the Covid-19 crisis have risen sharply. Why do we see this practice of ‘price gouging’ in an emergency? Should we care? And what could be done about it?

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What is the size of the fiscal multiplier?

What is likely to be the impact of a government stimulus or austerity plan in response to the coronavirus crisis on the whole economy? That is what is measured by the ‘fiscal multiplier’ – and the evidence indicates that increased public spending has a bigger impact during recessions.

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Quantitative easing and monetary financing: what’s the difference?

In March, the Bank of England’s Monetary Policy Committee restarted the programme of asset purchases known as quantitative easing or QE to provide support for the economy during the coronavirus crisis. How does it work and does it constitute ‘monetary financing’?

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‘Monetary financing’: is it happening and what are the dangers?

Has the Bank of England been ‘printing money’ to pay for government programmes to tackle the economic damage from the coronavirus crisis? No: it is useful to understand the division of responsibilities between fiscal policy and monetary policy – and why it exists.

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How can we measure consumer price inflation in a lockdown?

How can we keep track of consumer prices when visits to shops to collect data are not currently possible, when many items in the ‘shopping basket’ are not being trading – haircuts, restaurant meals and such like – and when patterns of spending have changed so much?

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Funded by

UKRI Economic and Social Research Council
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