Impact Of The On Uk 's Financial Stability Essay

Due to the 2008 financial crisis, the Bank of England employed quantitative easing (an unconventional monetary policy used to stimulate the economy) by cutting interest rates down to 0.5 % and has been keeping it until now. The Bank made the decision to keep QE and the interest rate unchanged in March. Spare capacity (the ability of a firm to produce more of a product than is now being produced) is used by the BoE to justify its use of forward guidance policy (a communicative tool for monetary policy). Low interest rates improved the economy by increasing consumption and investment, which are the components of AD. The AD curve shows the total spending on goods and services in a period of time at a given price level. In constructing on AD

The beneficial effects on the economy may take as much as two years to be fully felt. I Further, the UK should be careful not to rely on a weak currency in order to support its competitiveness. An Exchange rates tend to fluctuate in value over time and the strongest economies are usually those with high productivity and low production costs, or those which produce highly innovative products. The long term performance of the UK economy could be adversely affected if a weakening of the currency was allowed to distract from these more fundamental determinants of economic performance. An Overall, however, in the current context, a weakening of Sterling is likely to be seen as beneficial for the UK economy, helping to support it through a difficult time and aiding a rebalancing of the economy towards the export sector. Despite this, it should be remembered that in other contexts, for example when controlling inflation is a more pressing problem, a fall in the exchange rate could be damaging.

According to recent analysis from the International Monetary Fund (IMF), in 2010, the UK is estimated to have had the fourth highest level of structural government borrowing amongst the 29 advanced economies for which comparable data are accessible. This structural government borrowing is one of the main underlying issues that the Budget, over the reign of this current government, will try to address. However, at least according to plans published so far, the UK is intending the fourth largest fiscal consolidation among this same group of countries and so by 2017 the IMF predicts that the UK will have a lower level of structural borrowing than many other advanced economies, being below the average in the Euro area and below the average among the G20 and G7 countries.

Even a cursory study of the financial markets reveals that experts are worrying about multiple game-changing issues like Brexit, helicopter money, national debts and weak

When the UK economy is doing well, its pound sterling is strong. However, having a strong pound actually discourage visitors from overseas because when they exchange their money in pound they will be getting less money, so it make visiting UK expensive and it deter inbound visitor from visiting UK.

“Since 2007 to mid 2009, global financial markets and systems have been in the grip of the worst financial crisis since the depression era of the late 1920s. Major Banks in the U.S., the U.K. and Europe have collapsed and been bailed out by state aid”. (Valdez and Molyneux, 2010) Identify the main macroeconomic and microeconomic causes that resulted in the above-mentioned crisis and make an assessment of the success or otherwise of the actions taken by the U.K government to resolve the problem.

In the past few months, the Brexit referendum attracted the attention from the whole world. The globalisation has made the world today far more connected than ever so that every country could be affected by this big event. The globalisation has had profound and lasting influences to UK economy. This essay will firstly focus on the pros and cons of globalisation, then discuss the UK sectors which benefited and suffered from globalisation respectively, finally analysis the overall effect of globalisation on the UK economy.

One major event that took place in the latter part of 2014 was the vote on whether Scotland was to continue being a part of the UK – the Scottish Referendum. The vote took place on the 18th September 2014, with 84.6% of the Scottish population voting. The question that was asked to voters was ‘Should Scotland be an independent country?’ The result of the vote was 55.5% voting ‘No’ and 44.5% voting ‘Yes’ (The Scottish Government, 2014). The result of this vote had potentially harmful repercussions for many country’s monetary and financial systems, including the UK. This report will critically evaluate the impact that the Scottish Referendum has and may have for the UK.

Political situation in UK is stable. Her Majesty’s Government, led by Prime Minister, David Cameron, from the Conservative Party is mainly concerned about the financial crisis affecting economies all over the world

The “Great Recession” is commonly used to explain the massive economic contraction that occurred in the United States during the fourth quarter of 2007. However, the actions of the United States spanned to other nations, leaving massive effect on the global economy. One nation that took on serious financial burden during this recession was the United Kingdom. This nation first faced the effects of the Great Recession beginning in the first quarter of 2008. Overall, the initial mass effects on the nation can be attributed to the nation’s reliance on the financial sector. In fact, after partially stabilizing in 2009, the country struggled with a double-dip recession between 2010-12, and continues to struggle with some of these effects.

In my opinion, how effective low interests rates are to encourage consumers to borrow and spend depends on the elasticity of the demand for loans. If the demand for loans is inelastic, a sharp reduction in interest rates will only increase the loans by a small amount. Please refer to Appendix G. In this case, lowering the interest rates to 0.5% is not enough to stimulate demand. As a result, quantitative easing, another monetary policy is being utilized, as bank rates could not go any lower. Although there are other underlying factors that contribute to the high unemployment rate in the UK, it is shown that reducing bank rates is not the key to solving this problem.

Housing prices in the United States rose steadily after the World War II. Although some research indicated that the financial crisis started in the US housing market, the main cause of the financial crisis between 2007 and 2009 was actually the combination of housing bubble and credit boom. The banks created so much loan that pushed the housing price to the peak. As the bank lend out a huge amount of money, the level of individual debt also rose along with the housing price. Since the debt rose faster than people’s income, people were unable to repay their loan and bank found themselves were in danger. As this showed a signal for people, people withdrew money from the banks they considered as “safe” before, and increased the “haircuts” on repos and difficulties experienced by commercial paper issuers. This caused the short term funding market in the shadow banking system appeared a

Due to Brexit London Stock Exchange crashed and it saw trillions of pounds wiped off from UK’s share market. The share market became volatile. The investors of UK’s share market decided to move their funds to other European share market in Germany and Ireland and France. As a result pound lost its exchange value for the first time in last 15

In relation to the increase in house’s price, the rise of financial agreements such as mortgage-backed securities (MBS) and collateralized debt obligations (CDO) encouraged investors to invest in the U.S housing market (Krugman, 2009). When housing price declined in the U.S, many financial institutions that borrowed and invested in subprime mortgage reported losses. In addition, the fall of housing price resulted in default and foreclosure and that began to exhaust consumer’s wealth and

In September 2008, thousands of financial sectors all over the world went bankrupt like dominoes after the failure of Lehman Brothers Bank, which is also known as the Financial Crisis of 2008, caused the severe recession of the economies around the world. In order to help the country out of crisis, the central banks in different countries had to take measures to stimulate the growth of economy. The goal of this essay is to introduce the measures that Bank of England have taken in 2008 of financial crisis and will discuss the macroeconomics consequences and effects. Three measures taken by Bank of England will be presented in first section and how macroeconomics outcomes influenced by policies and objectives will be discussed in the second section.