research article on financial crisis

Financial Crisis

• The Financial Crisis
• Financial Data Tools

Articles and Papers

Monetary Policy and the Crisis

Historical perspectives on the crisis, what caused the crisis, the role of subprime mortgages.

• Possible Solutions

Financial Crisis Articles & Papers: All Topics

The articles and papers listed here cover aspects of the financial crisis and represent a range of opinions and analysis. The Federal Reserve Bank of St. Louis does not endorse the views presented in these articles or papers.

The Crisis: An Overview

The "Surprising" Origin and Nature of Financial Crises: A Macroeconomic Policy Proposal by Ricardo J. Caballero and Pablo Kurlat in Federal Reserve Bank of Kansas City Symposium , August 2009

The authors discuss three key ingredients for severe finanical crises in developed financial markets. Then they offer a policy proposal of tradable insurance credits to address a systemic crisis.

Bank Lending During the Financial Crisis of 2008 by Victoria Ivashina and David Scharfstein in SSRN , December 2008

This paper documents that new loans to large borrowers fell by 37% during the peak period of the financial crisis (September-November 2008) relative to the prior three-month period and by 68% relative to the peak of the credit boom (Mar-May 2007). New lending for real investment (such as capital expenditures) fell to the same extent as new lendi...  

The Commercial Paper Market, the Fed, and the 2007-2009 Financial Crisis by Richard G. Anderson and Charles S. Gascon in Federal Reserve Bank of St. Louis Review , November 2009

Since its inception in the early nineteenth century, the U.S. commercial paper market has grown to become a key source of short-term funding for major businesses, with issuance averaging over $100 billion per day. In the fall of 2008, the commercial paper market achieved national prominence when increasing market stress caused some to fear that,...  

The Credit Crunch of 2007-2008: A Discussion of the Background, Market Reactions, and Policy Responses by Paul Mizen in Federal Reserve Bank of St. Louis Review , September 2008

This paper discusses the events surrounding the 2007-08 credit crunch. It highlights the period of exceptional macrostability, the global savings glut, and financial innovation in mortgage-backed securities as the precursors to the crisis. The credit crunch itself occurred when house prices fell and subprime mortgage defaults increased. These event...  

The Crisis: Basic Mechanisms, and Appropriate Policies by Olivier J. Blanchard in IMF Working Ppaer , April 2009

The purpose of this lecture is to look beyond the complex events that characterize the global financial and economic crisis, identify the basic mechanisms, and infer the policies needed to resolve the current crisis, as well as the policies needed to reduce the probability of similar events in the future.

Deciphering the Liquidity and Credit Crunch 2007-08 by Markus K. Brunnermeier in Journal of Economic Perspectives , November 2008

This paper summarizes and explains the main events of the liquidity and credit crunch in 2007-08. Starting with the trends leading up to the crisis, Brunnermeier explains how these events unfolded and how four different amplification mechanisms magnified losses in the mortgage market into large dislocations and turmoil in financial markets.

Economic Recovery and Balance Sheet Normalization by Narayana R. Kocherlakota in Federal Reserve Bank of Minneapolis , April 2010

Speech before the Minnesota Chamber of Commerce

The Economics of Bank Restructuring: Understanding the Options by Augustin Landier and Kenichi Ueda in IMF Staff Position Note , June 2009

Based on a simple framework, this note clarifies the economics behind bank restructuring and evaluates various restructuring options for systemically important banks. The note assumes that the government aims to reduce the probability of a bank’s default and keep the burden on taxpayers at a minimum. The note also acknowledges that the design of...  

Factors Affecting Efforts to Limit Payments to AIG Counterparties by Thomas C. Baxter Jr. in Federal Reserve Bank of New York , February 2010

Testimony before the Committee on Government Oversight and Reform, U.S. House of Representatives

Facts and Myths about the Financial Crisis of 2008 by V. V. Chari, Lawrence Christiano and Patrick J. Kehoe in Federal Reserve Bank of Minneapolis Working Paper , October 2008

This paper examines three claims about the way the financial crisis is affecting the economy as a whole and argues that all three claims are myths. It also presents three underappreciated facts about how the financial system intermediates funds between households and corporate businesses.

The Federal Reserve Bank of New York's Involvement with AIG by Thomas C. Baxter and Sarah J. Dahlgren in Federal Reserve Bank of New York , May 2010

Joint written testimony of Thomas C. Baxter and Sarah Dahlgren before the Congressional Oversight Panel, Washington, D.C.

The Federal Reserve's Balance Sheet by Ben S. Bernanke in Speech , April 2009

The Federal Reserve has taken a number of aggressive and creative policy actions, many of which are reflected in the size and composition of the Fed's balance sheet. Bernanke provides a brief guided tour of the Federal Reserve's balance sheet as an instructive way to discuss the Fed's policy strategy and some related issues.

The Financial Crisis: Toward an Explanation and Policy Response by Aaron Steelman and John A.Weinberg in Federal Reserve Bank of Richmond Annual Report 2008 , April 2009

The essay is divided into the four sections. First, what has happened in the financial markets. Second, why those events took place. Third, possible market imperfections that could produce turmoil in the financial markets and an assessment of the role they have played in this case. And, fourth, how policymakers should respond in these difficult and...  

Financial Turmoil and the Economy by Frederick Furlong and Simon Kwan in Federal Reserve Bank of San Francisco Annual Report 2008 , May 2009

An overview of the financial crisis.

The Global Recession by Craig P. Aubuchon and David C. Wheelock in Federal Reserve Bank of St. Louis Economic Synopses , May 2009

Presents information on the percentage of economies around the world that are in recession, and offers comparisons with previous economic declines.

The Global Roots of the Current Financial Crisis and its Implications for Regulations by Anil K. Kashyap, Raghuram Rajan and Jeremy Stein in 5th ECB Central Banking Conference , November 2008

Where did the current financial crisis come from? Who or what is to blame? How will it be resolved? How do we undertake reforms for the future? These are the questions this paper will seek to answer. The analysis will have three parts. The first is a rough and ready sketch of the global roots of this crisis. Second, the authors focus in a more d...  

Interest on Excess Reserves as a Monetary Policy Instrument: The Experience of Foreign Central Banks by David Bowman, Etienne Gagnon, and Mike Leahy in Board of Governors International Finance Discussion Papers , March 2010

This paper reviews the experience of eight major foreign central banks with policy interest rates comparable to the interest rate on excess reserves paid by the Federal Reserve. We pursue two main lines of inquiry: 1) To what extent have these policy interest rates been lower bounds for short-term market rates, and 2) to what extent has tighteni...  

Lending Standards in Mortgage Markets by Carlos Garriga, in Federal Reserve Bank of St. Louis Economic Synopses , May 2009

Examines the mortgage denial rates by loan type as an indicator of loose lending standards.

Lessons Learned from the Financial Crisis by William C. Dudley in Speech , June 2009

In assessing the lessons of the past two years, Dudley focuses on five broad themes that are interrelated: Interconnectedness of the financial system; System dynamics—How does the system respond to shocks?; Incentives—Can we improve outcomes by changing incentives?; Transparency; How should central banks respond to asset bubbles?

Liquidity Risk, Credit Risk, and the Federal Reserve’s Responses to the Crisis by Asani Sarkar in Federal Reserve Bank of New York Staff Reports , September 2009

In responding to the severity and broad scope of the financial crisis that began in 2007, the Federal Reserve has made aggressive use of both traditional monetary policy instruments and innovative tools in an effort to provide liquidity. In this paper, the author examines the Fed’s actions in light of the underlying financial amplification mechanis...  

Looking Behind the Aggregates: A Reply to "Facts and Myths about the Financial Crisis of 2008" by Ethan Cohen-Cole, Burcu Duygan-Bump, Jose Fillat and Judit Montoriol-Garriga in Federal Reserve Bank of Boston Working Paper , November 2008

In reply to the FRB of Minneapolis article by Chari et al. (2008) the authors of this paper argue that to evaluate the four common claims about the impact of financial sector phenomena on the economy, (which the FRB Boston authors conclude are all myths), one needs to look at the underlying composition of financial aggregates. This article find ...  

A Minsky Meltdown: Lessons for Central Bankers by Janet Yellen in FRBSF Economic Letter , May 2009

In this essay, Federal Reserve Bank of San Francisco President Yellen reconsiders the notion of a 'Minsky Meltdown' and suggests that it is time to reconsider the notion that a central bank can not intervene in bubbles. Yellen also outlines her thoughts on supervisory and regulatory policies going forward, and the importance of varying capital req...  

Overview: Global Financial Crisis Spurs Unprecedented Policy Actions by Ingo Fender and Jacob Gyntelberg in BIS Quarterly Review , December 2008

A four-stage overview of the crisis. Market developments over the period under review went through four more or less distinct stages. Stage one, which led into the Lehman bankruptcy in mid-September, was marked by the takeover of two major US housing finance agencies by the authorities in the United States. Stage two encompassed the immediate impl...  

The Panic of 2007 by Gary B. Gorton in Federal Reserve Bank of Kansas City's Symposium: Maintaining Stability in a Changing Financial System , October 2008

How did problems with subprime mortgages result in a systemic crisis, a panic? The ongoing Panic of 2007 is due to a loss of information about the location and size of risks of loss due to default on a number of interlinked securities, special purpose vehicles, and derivatives, all related to subprime mortgages. Subprime mortgages are a financial...  

Preparing for a Smooth (Eventual) Exit by Brian P. Sack in Federal Reseve Bank of New York , March 2010

Remarks at the National Association for Business Economics Policy Conference, Arlington, Virginia

Putting the Financial Crisis and Lending Activity in a Broader Context by Kevin L. Kliesen in Federal Reserve Bank of St. Louis Economic Synopses , February 2009

This paper discusses how banks typically tighten credit standards and/or loan terms as the economy weakens and nonperforming loans increase. But an adverse shock from outside the financial sector can be just as important—such as a sharp increase in oil prices or a plunge in house prices.

The Response of the Federal Reserve to the Recent Banking and Financial Crisis by Randall S. Kroszner and William Melick in Chicago Booth School of Business Working Paper , December 2009

The authors present an account of the policy actions taken by the Fed, providing a narrative that brings together information that otherwise requires consulting a variety of sources. They also present a framework for thinking about the central bank policy response that gives the reader a means of organizing her own understanding of the response. A...  

The Role of Liquidity in Financial Crises by Franklin Allen and Elena Carletti in Federal Reserve Bank of Kansas City's Symposium: Maintaining Stability in a Changing Financial System , September 2008

The purpose of this paper is to use insights from the academic literature on crises to understand the role of liquidity in the current crisis. Allen and Carletti focus on four of the crucial features of the crisis that they argue are related to liquidity provision. The first is the fall of the prices of AAA-rated tranches of securitized products be...  

Speculative Bubbles and Financial Crisis by Pengfei Wang and Yi Wen in Federal Reserve Bank of St. Louis Working Paper , July 2009

Why are asset prices so much more volatile and so often detached from their fundamental values? Why does the bursting of financial bubbles depress the real economy? This paper addresses these questions by constructing an in?nite-horizon heterogeneous agent general equilibrium model with speculative bubbles. We characterize conditions under which st...  

The Supervisory Capital Assessment Program--One Year Later by Ben S. Bernanke in Speech , May 2010

At the Federal Reserve Bank of Chicago 46th Annual Conference on Bank Structure and Competition, Chicago, Illinois

The Taylor Rule and the Practice of Central Banking by Pier Francesco Asso, George A. Kahn, and Robert Leeson in Federal Reserve Bank of Kansas City Working Paper , February 2010

The Taylor rule has revolutionized the way many policymakers at central banks think about monetary policy. It has framed policy actions as a systematic response to incoming information about economic conditions, as opposed to a period-by-period optimization problem. It has emphasized the importance of adjusting policy rates more than one-for-one in...  

Toward an Effective Resolution Regime for Large Financial Institutions by Daniel K. Tarullo in Board of Governors Speech , March 2010

At the Symposium on Building the Financial System of the 21st Century, Armonk, New York

A Word on the Economy (with audio) by Julie L. Stackhouse in Federal Reserve Bank of St. Louis Educational Resources , September 2009

A powerpoint slideshow describing the subprime mortgage meltdown and how it relates to the overall financial crisis. Updated September 2009

“How Central Should the Central Bank Be?” A Comment by Christopher J. Neely in Federal Reserve Bank of St. Louis Economic Synopses , April 2010

The Reserve Bank presidents are fully accountable to our democratic institutions and the decentralized structure promotes healthy debate on monetary policy and regulatory issues.

Actions to Restore Financial Stability: A summary of recent Federal Reserve initiatives by Niel Willardson in The Region (Minneapolis Fed) , December 2008

This article provides a summary of recent Federal Reserve initiatives designed to reestablish normal credit channels and flows in the wake of the current financial crisis.

Activist Fiscal Policy to Stabilize Economic Activity by Alan J. Auerbach and William G. Gale in Federal Reserve Bank of Kansas City Symposium , August 2009

This paper examines the effects of discretionary fiscal policy in the current financial crisis.

Alt-A: The Forgotten Segment of the Mortgage Market by Rajdeep Sengupta in Federal Reserve Bank of St. Louis Review , January 2010

This study presents a brief overview of the Alt-A mortgage market with the goal of outlining broad trends in the different borrower and mortgage characteristics of Alt-A market originations between 2000 and 2006. The paper also documents the default patterns of Alt-A mortgages in terms of the various borrower and mortgage characteristics over th...  

Asset Bubbles and the Implications for Central Bank Policy by William C. Dudley in Federal Reserve Bank of New York , April 2010

Remarks at The Economic Club of New York, New York City

An Autopsy of the U.S. Financial System: Accident, Suicide, or Negligent Homicide? by Ross Levine in Brown University Working Paper , April 2010

In this postmortem, I find that the design, implementation, and maintenance of financial policies during the period from 1996 through 2006 were primary causes of the financial system’s demise. The evidence is inconsistent with the view that the collapse of the financial system was caused only by the popping of the housing bubble and the herding ...  

Bank Exposure to Commercial Real Estate by Yuliya Demyanyk and Kent Cherny in Federal Reserve Bank of Cleveland Economic Trends , August 2009

As rising home foreclosures and delinquencies continue to undermine a financial and economic recovery, an increasing amount of attention is being paid to another corner of the property market: commercial real estate. This article discusses bank exposure to the commercial real estate market.

Bankers Acceptances and Unconventional Monetary Policy: FAQs by Richard G. Anderson in Federal Reserve Bank of St. Louis Economic Synopses , March 2009

An expansion and FAQ following on an earlier article ("Bankers Acceptances: Yesterday's Instrument to Re-Start Today's Credit Markets?"). Describes possible implementation of a Banker's Acceptances program at the Federal Reserve.

Bankers’ Acceptances: Yesterday’s Instrument to Restart Today's Credit Markets? by Richard G. Anderson in Federal Reserve Bank of St. Louis Economic Synopses , January 2009

This note suggests considering an old—not new—financial market instrument: bankers’ acceptances. Bankers’ acceptances are one of the world’s older financial instruments, used as early as the twelfth century. Bankers’ acceptances have a long history in the Federal Reserve. Bankers’ acceptances are an old idea whose time may have returned—but with c...  

Beyond the Crisis: Reflections on the Challenges by Terrence J. Checki in Federal Reserve Bank of New York Speech , December 2009

A discussion of the challenges facing the financial system and reform.

A Black Swan in the Money Market by John B. Taylor and John C. Williams in Federal Reserve Bank of San Francisco Working Paper , April 2008

At the center of the financial market crisis of 2007-2008 was a jump in spreads between the overnight inter-bank lending rate and term London inter-bank offer rates (Libor). Because many private loans are linked to Libor rates, the sharp increase in these spreads raised the cost of borrowing and interfered with monetary policy. The widening spread...  

Central Bank Exit Policies by Donald L. Kohn in Speech, Board of Governors , September 2009

Kohn briefly underlines some aspects of the Federal Reserve's framework for exiting the unusual policies put in place to ameliorate the effects of the financial turmoil of the past two years

Central Bank Response to the 2007-08 Financial Market Turbulence: Experiences and Lessons Drawn by Alexandre Chailloux, Simon Gray, Ulrich Klüh, Seiichi Shimizu, and Peter Stella in IMF Working Paper , September 2008

The paper reviews the policy response of major central banks during the 2007–08 financial market turbulence and suggests that there is scope for convergence among central bank operational frameworks through the adoption of those elements that proved most instrumental in calming markets. These include (i) rapid liquidity provision to a broad rang...  

Central Banks and Financial Crises by Willem H. Buiter in Federal Reserve Bank of Kansas City's Symposium: Maintaining Stability in a Changing Financial System , August 2008

This paper draws lessons from the experience of the past year for the conduct of central banks in the pursuit of macroeconomic and financial stability. Macroeconomic stability is defined as either price stability or as price stability and sustainable output or employment growth. Financial stability refers to (1) the absence of asset price bubbles...  

Commercial Bank Lending Data during the Crisis: Handle with Care by Silvio Contessi and Hoda El-Ghazaly, in Federal Reserve Bank of St. Louis Economic Synopses , August 2009

A discussion of commercial bank lending data, inferences that can be drawn from the data, and some caveats about the data.

Confronting Too Big to Fail by Daniel K. Tarullo in Speech, Board of Governors , October 2009

Tarullo suggests that the reform process cannot be judged a success unless it substantially reduces systemic risk generally and, in particular, the too-big-to-fail problem. This speech addresses the task of forging an effective response to this problem

Conventional and Unconventional Monetary Policy by Vasco Cúrdia and Michael Woodford in Federal Reserve Bank of New York Staff Reports , November 2009

We extend a standard New Keynesian model both to incorporate heterogeneity in spending opportunities along with two sources of (potentially time-varying) credit spreads and to allow a role for the central bank’s balance sheet in determining equilibrium. We use the model to investigate the implications of imperfect financial intermediation for famil...  

Crisis and Responses: the Federal Reserve and the Financial Crisis of 2007-08 by Stephen G. Cecchetti in NBER Working Paper (requires subscription) , June 2008

Realizing that their traditional instruments were inadequate for responding to the crisis that began on 9 August 2007, Federal Reserve officials improvised. Beginning in mid-December 2007, they implemented a series of changes directed at ensuring that liquidity would be distributed to those institutions that needed it most. Conceptually, this me...  

The Curious Case of the U.S. Monetary Base by Richard G. Anderson in Federal Reserve Bank of St. Louis Regional Economist , July 2009

Recent increases in the monetary base are far greater than any previously in American history, surely a "noble experiment" in policymaking. Whether these policies can succeed—and without accelerating inflation—remains to be seen.

The Dependence of the Financial System on Central Bank and Government Support by Petra Gerlach in BIS Quarterly Review , March 2010

How much does the banking sector depend on public support? Utilisation of many support facilities has declined, due mainly to a fall in demand. Supply factors play a smaller, but not insignificant role, as governments and central banks have tightened the conditions on which certain support measures are available or have phased them out entirely. Ho...  

Do Central Bank Liquidity Facilities by Jens H. E. Christensen, Jose A. Lopez, and Glenn D. Rudebusch in Federal Reserve Bank of San Francisco Working Paper , June 2009

In response to the global financial crisis that started in August 2007, central banks provided extraordinary amounts of liquidity to the financial system. To investigate the effect of central bank liquidity facilities on term interbank lending rates, the authors estimate a six-factor arbitrage-free model of U.S. Treasury yields, financial corporate...  

The Economic Outlook and the Fed's Balance Sheet: The Issue of "How" versus "When" by William C. Dudley in Speech , July 2009

Dudley comments on the economy and the economic outlook—where we have been and where we may be going. He suggests that the balance of risks is still tilted toward weakness in growth and employment and not toward higher inflation. He also discusses the impact of the Federal Reserve’s lending facilities and purchase programs on the size of the Fed’s ...  

Economic Policy: Lessons from History by Ben S. Bernanke in Board of Governors Speech , April 2010

At the 43rd Annual Alexander Hamilton Awards Dinner, Center for the Study of the Presidency and Congress, Washington, D.C.

The Effect of the Term Auction Facility on the London Inter-Bank Offered Rate by James McAndrews, Asani Sarkar and Zhenyu Wang in Federal Reserve Bank of New York Staff Report , July 2008

This paper examines the effects of the Federal Reserve’s Term Auction Facility (TAF) on the London Inter-Bank Offered Rate (LIBOR). The particular question investigated is whether the announcements and operations of the TAF are associated with downward shifts of the LIBOR; such an association would provide one indication of the efficacy of the TAF ...  

Effective Practices in Crisis Resolution and the Case of Sweden by O. Emre Ergungor and Kent Cherny in Federal Reserve Bank of Cleveland Economic Commentary , February 2009

The current fi nancial crisis is a painful reminder that the developed world is not yet immune to these devastating shocks. But while we haven’t learned to prevent them, we have learned some lessons about what is necessary to contain them once they begin and to limit the damage that follows. As policymakers worldwide focus on resolving the current ...  

The Fed as Lender of Last Resort by James B. Bullard in Federal Reserve Bank of St. Louis Regional Economist , January 2009

Because our central bank has relied on the federal funds rate target for so long to guide the economy, many people think that the target rate is the only tool at the Fed’s disposal. As we are seeing in the current financial crisis, the Fed has other options. Most visible so far have been the lending programs that have been created in the past year,...  

The Fed's Response to the Credit Crunch by Craig P. Aubuchon in Federal Reserve Bank of St. Louis Econoimc Synopses , January 2009

The Federal Reserve Board has used Section 13(3) of the Federal Reserve Act to create several new lending facilities to address the ongoing strains in the credit market.

The Fed, Liquidity, and Credit Allocation by Daniel Thornton in Federal Reserve Bank of St. Louis Review , January 2009

The current financial turmoil has generated considerable discussion of liquidity. Moreover, it has been widely reported that the Federal Reserve played a major role in supplying liquidity to financial markets during this distressed time. This article describes two ways in which the Fed has supplied liquidity since late 2007. The first is traditiona...  

The Federal Reserve as Lender of Last Resort during the Panic of 2008 by Kenneth N. Kuttner in Committee on Capital Markets Regulation Report , December 2008

This report examines the impact of the Fed’s unprecedented lending on its formulation and implementation of monetary policy. The first section provides some background on the Fed’s recent actions within the context of its role as lender of last resort (LOLR). The second outlines some of the ways in which the surge in Fed lending has affected the...  

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Federal Reserve Assets: Understanding the Pieces of the Pie by Charles S. Gascon in Federal Reserve Bank of St. Louis Economic Synopses , March 2009

This paper examines the composition of assets on the Fed’s balance sheet and groups them according to the objectives of the programs used to acquire them.

The Federal Reserve's Balance Sheet: An Update by Ben S. Bernanke in Speech, Board of Governors , October 2009

Bernanke reviews the most important elements of the Federal Reserve's balance sheet, as well as some aspects of their evolution over time. With this, he explains the steps the Federal Reserve has taken, beyond conventional interest rate reductions, to mitigate the financial crisis and the recession, as well as how those actions will be reversed as ...  

Federal Reserve's exit strategy by Ben S. Bernanke in Board of Governors Testimony , February 2010

Statement before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C. as prepared for delivery. The hearing was postponed due to inclement weather.

The Federal Reserve's Term Auction Facility by Olivier Armantier, Sandra Krieger and James McAndrews in Federal Reserve Bank of New York: Current Issues in Economics and Finance , July 2008

As liquidity conditions in the term funding markets grew increasingly strained in late 2007, the Federal Reserve began making funds available directly to banks through a new tool, the Term Auction Facility (TAF). The facility is designed to improve liquidity by making it easier for sound institutions to borrow when the markets are not operating ...  

The Federal Reserve’s Commercial Paper Funding Facility by Tobias Adrian, Karin Kimbrough, and Dina Marchioni in Federal Reserve Bank of New York Staff Reports , January 2010

The Federal Reserve created the Commercial Paper Funding Facility (CPFF) in the midst of severe disruptions in money markets following the bankruptcy of Lehman Brothers on September 15, 2008. The CPFF finances the purchase of highly rated unsecured and asset-backed commercial paper from eligible issuers via primary dealers. The facility is a liquid...  

Financial Crises and Bank Failures: A Review of Prediction Methods by Yuliya Demyanyk and Iftekhar Hasan in Federal Reserve Bank of Cleveland Working Paper , June 2009

In this article the authors analyze financial and economic circumstances associated with the U.S. subprime mortgage crisis and the global financial turmoil that has led to severe crises in many countries. They suggest that the level of cross-border holdings of long-term securities between the United States and the rest of the world may indicate...  

The Financial Crisis: An Inside View by Phillip Swagel in Brookings Papers on Economic Activity , April 2009

This paper reviews the events associated with the credit market disruption that began in August 2007 and developed into a full-blown crisis in the fall of 2008. This is necessarily an incomplete history: the paper is being written in the months immediately after Swagel left Treasury, where he served as Assistant Secretary for Economic Policy from D...  

Financial Instability, Reserves, and Central Bank Swap Lines in the Panic of 2008 by Maurice Obstfeld, Jay C. Shambaugh and Alan M. Taylor in AEA Presentation Paper , December 2008

In this paper the authors connect the events of the last twelve months, “the Panic of 2008” as it has been called, to the demand for international reserves. In previous work, the authors have shown that international reserve demand can be rationalized by a central bank’s desire to backstop the broad money supply to avert the possibility of an in...  

Financial Intermediaries, Financial Stability and Monetary Policy by Tobias Adrian and Hyun Song Shin in Federal Reserve Bank of Kansas City's Symposium: Maintaining Stability in a Changing Financial System , September 2008

In a market-based financial system, banking and capital market developments are inseparable. Adrian and Shin document evidence that balance sheets of market-based financial intermediaries provide a window on the transmission of monetary policy through capital market conditions. Short-term interest rates are determinants of the cost of leverage and ...  

Focusing on Bank Interest Rate Risk Exposure by Donald L. Kohn in Board of Governors Speech , January 2010

At the Federal Deposit Insurance Corporation's Symposium on Interest Rate Risk Management, Arlington, Virginia

A Framework for Assessing the Systemic Risk of Major Financial Institutions by Xin Huang, Hao Zhou, and Haibin Zhu in Federal Reserve Board, Finance and Economics Discussion Series , September 2009

In this paper the authors propose a framework for measuring and stress testing the systemic risk of a group of major financial institutions. The systemic risk is measured by the price of insurance against financial distress, which is based on ex ante measures of default probabilities of individual banks and forecasted asset return correlations. Imp...  

Further Results on a Black Swan in the Money Market by John B. Taylor and John C. Williams in Stanford University Working Paper , May 2008

Using alternative measures of term lending rates and counterparty risk and a wide variety of econometric specifications, we find that counterparty risk has a robust significant effect on interest rate spreads in the term inter-bank loan markets. In contrast, we do not find comparably robust evidence of significant negative effects of the Fed’s t...  

Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis by John B. Taylor in Federal Reserve Bank of St. Louis Review , May 2010

This article reviews the role of monetary and fiscal policy in the financial crisis and draws lessons for future macroeconomic policy. It shows that policy deviated from what had worked well in the previous two decades by becoming more interventionist, less rules-based, and less predictable. The policy implications are thus that policy should “g...  

Government assistance to AIG by Scott G. Alvarez in Testimony before the Congressional Oversight Panel, U.S. Congress , May 2010

Housing, Mortgage Markets, and Foreclosures at the Federal Reserve System Conference on Housing and Mortgage Markets, Washington, D.C. by Ben Bernanke in Speech , December 2008

Housing and housing finance played a central role in precipitating the current crisis. Declining house prices, delinquencies and foreclosures, and strains in mortgage markets are now symptoms as well as causes of our general financial and economic difficulties. The most effective approach very likely will involve a full range of coordinated measu...  

How Did a Domestic Housing Slump Turn into a Global Financial Crisis? by Steven B. Kamin and Laurie Pounder DeMarco in Board of Governors International Finance Discussion Papers , January 2010

The global financial crisis clearly started with problems in the U.S. subprime sector and spread across the world from there. But was the direct exposure of foreigners to the U.S. financial system a key driver of the crisis, or did other factors account for its rapid contagion across the world? To answer this question, we assessed whether countr...  

How Not to Reduce Excess Reserves by David C. Wheelock in Federal Reserve Bank of St. Louis Economic Synopses , August 2009

The author looks back to a simliar economic situation during the 1930s for insights into how to handle excess reserves.

How the Subprime Crisis Went Global: Evidence from Bank Credit Default Swap Spreads by Barry Eichengreen, Ashoka Mody, Milan Nedeljkovic, and Lucio Sarno in NBER Working Paper (requires subscription) , April 2009

How did the Subprime Crisis, a problem in a small corner of U.S. financial markets, affect the entire global banking system? To shed light on this question we use principal components analysis to identify common factors in the movement of banks' credit default swap spreads. We find that fortunes of international banks rise and fall together even...  

How to Avoid a New Financial Crisis by Oliver Hart and Luigi Zingales in University of Chicago Booth School of Business Research Paper , November 2009

This paper discusses the origins of the financial crisis in terms of risk, and then offers proposals for ways to fix the system.

International Policy Response to the Financial Crisis by Masaaki Shirakawa in Federal Reserve Bank of Kansas City Symposium , August 2009

A discussion of the future of international coordination between central banks in the wake of the current financial crisis.

Interview with Raghuram Rajan in Federal Reserve Bank of Minneapolis Region , December 2009

An interview with Rajan discussing the current financial crisis and possible solutions for the future.

Is Monetary Policy Effective During Financial Crises? by Frederic S. Mishkin in NBER Working Paper (requires subscription) , January 2009

The tightening of credit standards and the failure of the cost of credit to households and businesses to fall despite the sharp easing of monetary policy has led to a common view that monetary policy has not been effective during the recent financial crisis. Mishkin disagrees and believes that financial crises of the type we have been experiencing ...  

Is the Financial Crisis Over? A Yield Spread Perspective by Massimo Guidolin and Yu Man Tam in Federal Reserve Bank of St. Louis Economic Synopses , September 2009

Our finding is consistent with some recent, substantial volatility in the U.S. corporate bond market and leaves open a possibility that additional, future shocks to default premia may have long-lived effects.

Lessons Learned? Comparing the Federal Reserve’s Responses to the Crises of 1929-1933 and 2007-2009 by David C. Wheelock in Federal Reserve Bank of St. Louis Review , March 2010

The financial crisis of 2007-09 is widely viewed as the worst financial disruption since the Great Depression of 1929-33. However, the accompanying economic recession was mild compared with the Great Depression, though severe by postwar standards. Aggressive monetary, fiscal, and financial policies are widely credited with limiting the impact of...  

Lessons of the Crisis: The Implications for Regulatory Reform by William C. Dudley in Speech, Federal Reserve Bank of New York , January 2010

Remarks at the Partnership for New York City Discussion, New York City.

The Longer-Term Challenges Ahead by William C. Dudley in Federal Reserve Bank of New York Speech , March 2010

Remarks at the Council of Society Business Economists Annual Dinner, London, United Kingdom

Macroprudential Supervision and Monetary Policy in the Post-crisis World by Janet L. Yellen in Board of Governors Speech , October 2010

Speech at the Annual Meeting of the National Association for Business Economics, Denver, Colorado

The Mechanics of a Graceful Exit: Interest on Reserves and Segmentation in the Federal Funds Market by Morten L. Bech and Elizabeth Klee in Federal Reserve Bank of New York Staff Reports , December 2009

To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds rate began to deviate from the target rate set by the Fed...  

Monetary Policy and Asset Prices by Brett W. Fawley and Luciana Juvenal in Federal Reserve Bank of St. Louis Economic Synopses , April 2010

reminder that asset prices can and do run wild at rates capable of negative effects on real economic activity. Not surprisingly, this has reinvigorated debate over whether central banks should respond to asset price bubbles.

Monetary Policy and the Recent Extraordinary Measures Taken by the Federal Reserve by John B. Taylor in U.S. House Committee on Financial Services , February 2009

Written testimony before the Committee on Financial Services U.S. House of Representatives on monetary policy and the "extraordinary measures" taken by the Federal Reserve over the past 18 months.

Monetary Policy in the Crisis: Past, Present, and Future by Donald L. Kohn in Board of Governors Speech , January 2010

Speech given at the Brimmer Policy Forum, American Economic Association Annual Meeting, Atlanta, Georgia

More Lessons from the Crisis by William C. Dudley in Federal Reserve Bank of New York Speech , November 2009

Remarks at the Center for Economic Policy Studies Symposium

More Money: Understanding Recent Changes in the Monetary Base by William T. Gavin in Federal Reserve Bank of St. Louis Review , March 2009

The financial crisis that began in the summer of 2007 took a turn for the worse in September 2008. Until then, Federal Reserve actions taken to improve the functioning financial markets did not affect the monetary base. The unusual lending and purchase of private debt was offset by the sale of Treasury securities so that the total size of the ba...  

Moving Beyond the Financial Crisis by Elizabeth A. Duke in Board of Governors Speech , June 2010

At the Consumer Bankers Association Annual Conference, Hollywood, Florida

On the Effectiveness of the Federal Reserve's New Liquidity Facilities by Tao Wu in Federal Reserve Bank of Dallas Working Paper , May 2008

This paper examines the effectiveness of the new liquidity facilities that the Federal Reserve established in response to the recent financial crisis. I develop a no-arbitrage based affine term structure model with default risk and conduct a thorough factor analysis of the counterparty default risk among major financial institutions and the underly...  

Paying Interest on Deposits at Federal Reserve Banks by Richard G. Anderson in Federal Reserve Bank of St. Louis Economic Synopses , November 2008

The implementation of monetary policy in developed economies relies on three interest rates: a policy target rate, one or more lending (or, discount) rates, and a remuneration rate, the rate of interest the central bank pays on the deposits that banks hold at the central bank. In the current economic crisis, management of the remuneration rate has ...  

Policies to Bring Us Out of the Financial Crisis and Recession by Donald L. Kohn in Speech , April 2009

Kohn discusses the actions the government is taking to address our current financial and economic difficulties, focusing on the economic and financial problems and policy responses in the United States.

Provision of Liquidity through the Primary Credit Facility during the Financial Crisis: A Structural Analysis by Erhan Artuç and Selva Demiralp in Federal Reserve Bank of New York Economic Policy Review , October 2009

In response to the liquidity crisis that began in August 2007, central banks designed a variety of tools for supplying liquidity to financial institutions. The Federal Reserve introduced several programs, such as the Term Auction Facility, the Term Securities Lending Facility, and the Primary Dealer Credit Facility, while enhancing its open market ...  

Putting the Low Road Behind Us by Governor Sarah Bloom Raskin in Speech at the 2011 Midwinter Housing Finance Conference, Park City, Utah , February 2011

In this speech Governor Raskin shares some thoughts about the powerful impact the housing and mortgage markets have on the nation's economic recovery, presents some ideas to effect positive change in the mortgage servicing industry, and finally imparts a guiding principle that should help us find our way through the current struggles and drive the ...  

Quantitative Easing: Entrance and Exit Strategies by Alan S. Blinder in Federal Reseve Bank of St. Louis Homer Jones Memorial Lecture , April 2010

Blinder discussed the concept of quantitative easing, the Fed's entrance strategy, the Fed's exit strategy, and its implications for central bank independence.

Questions about Fiscal Policy: Implications from the Financial Crisis of 2008-2009 by N. Gregory Mankiw in Federal Reserve Bank of St. Louis Review , May 2010

This article is a modified version of remarks given at the Federal Reserve Bank of Philadelphia’s policy forum “Policy Lessons from the Economic and Financial Crisis,” December 4, 2009.

Questions and Answers about the Financial Crisis by Gary Gorton in Prepared Testimony for the U.S. Financial Crisis Inquiry Commission , February 2010

All bond prices plummeted (spreads rose) during the financial crisis, not just the prices of subprimerelated bonds. These price declines were due to a banking panic in which institutional investors and firms refused to renew sale and repurchase agreements (repo) – short?term, collateralized, agreements that the Fed rightly used to count as money...  

Reaping the Full Benefits of Financial Openness by Yellen, Janet L. in Federal Reserve Board of Governors Speech , May 2011

Speech at the Bank of Finland 200th Anniversary Conference, Helsinki, Finland

Reflections on a Year of Crisis by Ben S. Bernanke in Federal Reserve Bank of Kansas City Symposium , August 2009

The opening remarks at the Jackson Hole conference, "Financial Stability and Macroeconomic Policy"

Resolution Process for Financial Companies that Pose Systemic Risk to the Financial System and Overall Economy by Thomas M. Hoenig, Charles S. Morris, and Kenneth Spong in Federal Reserve Bank of Kansas City Speech , September 2009

The Under current law, financial regulators do not have the authority to resolve financial holding companies and non-depository financial companies that are in default or serious danger of default as they have with depository institutions. Although the normal bankruptcy process is a very effective process for most non-depository financial companie...  

Rethinking Macroeconomic Policy by Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro in IMF Staff Position Note , February 2010

The great moderation lulled macroeconomists and policymakers alike in the belief that we knew how to conduct macroeconomic policy. The crisis clearly forces us to question that assessment. In this paper, we review the main elements of the pre-crisis consensus, we identify where we were wrong and what tenets of the pre-crisis framework still hold, a...  

The Risk of Deflation by John C.Williams in Federal Reserve Bank of San Francisco Economic Letter , March 2009

This article examines the risk of deflation in the United States by reviewing the evidence from past episodes of deflation and inflation.

The Role of the Federal Reserve in a New Financial Order by Paul A. Volcker in Speech at the Economic Club of New York , January 2010

Paul Volcker's discussion of the role of the Federal Reserve in light of the Financial Crisis.

The Role of the Securitization Process in the Expansion of Subprime Credit by Taylor D. Nadauld and Shane M. Sherlund in Board of Governors Finance and Economics Discussion Series , April 2009

The authors analyze the structure and attributes of subprime mortgage-backed securitization deals originated between 1997 and 2007. Their data set allows us to link loan-level data for over 6.7 million subprime loans to the securitization deals into which the loans were sold. They show that the securitization process, including the assignment of cr...  

Shadow Banking by Zoltan Pozsar, Tobias Adrian, Adam Ashcraft, Hayley Boesky in Federal Reserve Bank of New York Staff Reports no. 458 , July 2010

This paper documents the origins, evolution and economic role of the shadow banking system. Its aim is to aid regulators and policymakers globally to reform, regulate and supervise the process of securitized credit intermediation in a market-based financial system.

The Shadow Banking System: Implications for Financial Regulation by Tobias Adrian and Hyun Song Shin in Federal Reserve Bank of New York Staff Report , July 2009

The current financial crisis has highlighted the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a profound influence on the global financial system. In a market-...  

Should Monetary Policy “Lean or Clean”?* by William R. White in Federal Reserve Bank of Dallas Working Paper , August 2009

It has been contended by many in the central banking community that monetary policy would not be effective in “leaning” against the upswing of a credit cycle (the boom) but that lower interest rates would be effective in “cleaning” up (the bust) afterwards. In this paper, these two propositions (can’t lean, but can clean) are examined and found ser...  

Some Observations and Lessons from the Crisis by Simon M. Potter in Federal Reserve Bank of New York Speech , June 2010

Remarks at the Third Annual Connecticut Bank and Trust Company Economic Outlook Breakfast, Hartford, Connecticut

Structural Causes of the Global Financial Crisis: A Critical Assessment of the ‘New Financial Architecture’ by James Crotty in University of Massachusetts Amherst Working Paper , August 2008

The main thesis of this paper is that the ultimate cause of the current global financial crisis is to be found in the deeply flawed institutions and practices of what is often referred to as the New Financial Architecture (NFA) – a globally integrated system of giant bank conglomerates and the so-called ‘shadow banking system’ of investment ban...  

Systemic Risk and Deposit Insurance Premiums by Viral V. Acharya, João A. C. Santos, and Tanju Yorulmazer in Federal Reserve Bank of New York Economic Policy Review , October 2009

While systemic risk—the risk of wholesale failure of banks and other financial institutions—is generally considered to be the primary reason for supervision and regulation of the banking industry, almost all regulatory rules treat such risk in isolation. In particular, they do not account for the very features that create systemic risk in the first...  

Systemic Risk and the Financial Crisis: A Primer by James Bullard, Christopher J. Neely, and David C. Wheelock in Federal Reserve Bank of St. Louis Review , September 2009

How did problems in a relatively small portion of the home mortgage market trigger the most severe financial crisis in the United States since the Great Depression? Several developments played a role, including the proliferation of complex mortgage-backed securities and derivatives with highly opaque structures, high leverage, and inadequate risk m...  

The Term Securities Lending Facility: Origin, Design, and Effects by Michael J. Fleming, Warren B. Hrung and Frank M. Keane in Federal Reserve Bank of New York Current Issues in Economics and Finance , February 2009

The Federal Reserve launched the Term Securities Lending Facility (TSLF) in 2008 to promote liquidity in the funding markets and improve the operation of the broader financial markets. The facility increases the ability of dealers to obtain cash in the private market by enabling them to pledge securities temporarily as collateral for Treasuries, wh...  

Three Funerals and a Wedding by James B. Bullard in Federal Reserve Bank of St. Louis Review , January 2009

A discussion of three macroeconomic ideas that may be passing away, and one macroeconomic idea that is being rehabilitated.

Three Lessons for Monetary Policy from the Panic of 2008 by James Bullard in Federal Reserve Bank of St. Louis Review , May 2010

This article is a modified version of a presentation given at the Federal Reserve Bank of Philadelphia’s policy forum “Policy Lessons from the Economic and Financial Crisis,” December 4, 2009.

The U.S. Financial System: Where We Have Been, Where We Are and Where We Need to Go by William C. Dudley in Federal Reserve Bank of New York Speech , February 2010

Remarks at the Reserve Bank of Australia's 50th Anniversary Symposium, Sydney, Australia

Unconventional Monetary Policy Actions by Glen D. Rudebusch in Federal Reserve Bank of San Francisco FedViews , March 2009

Glenn D. Rudebusch, senior vice president and associate director of research at the Federal Reserve Bank of San Francisco, states his views on recent unconventional monetary policy actions. Charts are included.

United States: Financial System Stability Assessment by The Monetary and Capital Markets and Western Hemisphere Departments of the International Monetary Fund in International Monetary Fund, IMF Country Report No. 10/247 , July 2010

A forceful policy response has rolled back systemic market pressures, but the cost of intervention has been high and stability is tenuous. Comprehensive reforms are being legislated, addressing many of the issues that left the system vulnerable. Given the severity of the crisis and the many weaknesses revealed, bolder action could have been envi...  

Valuing the Treasury’s Capital Assistance Program by Paul Glasserman and Zhenyu Wang in Federal Reserve Bank of New York Staff Reports , December 2009

The Capital Assistance Program (CAP) was created by the U.S. government in February 2009 to provide backup capital to large financial institutions unable to raise sufficient capital from private investors. Under the terms of the CAP, a participating bank receives contingent capital by issuing preferred shares to the Treasury combined with embedded ...  

A View of the Economic Crisis and the Federal Reserve’s by Janet L. Yellen in Federal Reserve Bank of San Francisco Economic Letter , July 2009

The Federal Reserve has responded to a severe recession by developing programs to bolster the financial system and restore economic growth. The Fed has the tools to unwind these programs when appropriate, maintaining price stability. The following is adapted from a speech delivered by the president and CEO of the Federal Reserve Bank of San Francis...  

Walter Bagehot, the Discount Window, and TAF by Daniel Thornton in Federal Reserve Bank of St. Louis Economic Synopses , October 2008

In response to the mortgage-related distress in financial markets, the Fed has implemented a number of new lending programs. Prominent among these is the Term Auction Facility (TAF), through which the Federal Reserve Banks auction funds to depository institutions. Under the TAF, depository institutions compete for funds by indicating the amount th...  

Would Quantitative Easing Sooner Have Tempered the Financial Crisis and Economic Recession? by Daniel L. Thornton in Federal Reserve Bank of St. Louis Economic Synopses , August 2009

The author examines the timing of the quantitative easing employed by the Federal Reserve.

The Aftermath of Financial Crises by Carmen Reinhart and Kenneth S. Rogoff in Harvard University Working Paper , December 2008

This paper presents a comparative historical analysis that is focused on the aftermath of systemic banking crises. This study of the aftermath of severe financial crises includes a number of recent emerging market cases to expand the relevant set of comparators. Also included in the comparisons are two prewar developed country episodes for which w...  

Banking Crises: An Equal Opportunity Menace by Carmen M. Reinhart and Kenneth S. Rogoff in Harvard University Working Paper , December 2008

The historical frequency of banking crises is quite similar in high- and middle-to-low income countries, with quantitative and qualitative parallels in both the run-ups and the aftermath. The authors establish these regularities using a unique dataset spanning from Denmark’s financial panic during the Napoleonic War to the ongoing global financial ...  

The Crisis through the Lens of History by Charles Collyns in International Monetary Fund: Finance and Development , December 2008

The current financial crisis is ferocious, but history shows the way to avoid another Great Depression

The Current Financial Crisis: What Should We Learn from the Great Depressions of the Twentieth Century? by Gonzalo Fernández de Córdoba and Timothy J. Kehoe in Federal Reserve Bank of Minneapolis Staff Report , March 2009

Studying the experience of countries that have experienced great depressions during the twentieth century teaches us that massive public interventions in the economy to maintain employment and investment during a financial crisis can, if they distort incentives enough, lead to a great depression.

The Evolution of the Subprime Mortgage Market by Souphala Chomsisengphet and Anthony Pennington-Cross in Federal Reserve Bank of St. Louis Review , January 2006

This paper describes subprime lending in the mortgage market and how it has evolved through time. Subprime lending has introduced a substantial amount of risk-based pricing into the mortgage market by creating a myriad of prices and product choices largely determined by borrower credit history (mortgage and rental payments, foreclosures and bankru...  

Financial Statistics for the United States and the Crisis: What Did They Get Right, What Did They Miss, and How Should They Change? by Matthew J. Eichner, Donald L. Kohn, and Michael G. Palumbo in Board of Governors Finance and Economics Discussion Series , April 2010

Although the instruments and transactions most closely associated with the financial crisis of 2008 and 2009 were novel, the underlying themes that played out in the crisis were familiar from previous episodes: Competitive dynamics resulted in excessive leverage and risktaking by large, interconnected firms, in heavy reliance on short-term sourc...  

The Global Credit Crisis as History by Barry Eichengreen in University of California Berkeley Polcy Paper , December 2008

During the Great Depression the Fed waited too long to execute its responsibilities as a lender of last resort, thus allowing the banking system to collapse. This time, there has been little hesitation on the part of the Fed to act, which leaves two questions: Why, given that this is a global credit crisis, have policy makers in other countries fai...  

An Historical Perspective on the Crisis of 2007-2008 by Michael D. Bordo in Bank of Chile Conference , November 2008

The current international financial crisis is part of a perennial pattern. Today’s events have echoes in earlier big international financial crises which were triggered by events in the U.S. financial system. Examples include the crises of 1857,1893, 1907 and 1929-1933. This crisis has many similarities to those of the past but also some important ...  

Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007 by Gary B. Gorton in SSRN Paper , May 2009

The 'shadow banking system' at the heart of the current credit crisis is, in fact, a real banking system – and is vulnerable to a banking panic. Indeed, the events starting in August 2007 are a banking panic. A banking panic is a systemic event because the banking system cannot honor its obligations and is insolvent. Unlike the historical banking p...  

Stock-Market Crashes and Depressions by Robert J. Barro and José F. Ursúa in NBER Working Paper (requires subscription) , February 2009

Long-term data for 25 countries up to 2006 reveal 195 stock-market crashes (multi-year real returns of -25% or less) and 84 depressions (multi-year macroeconomic declines of 10% or more), with 58 of the cases matched by timing. The United States has two of the matched events--the Great Depression 1929-33 and the post-WWI years 1917-21, likely drive...  

Systemic Banking Crisis: A New Database by Luc Laeven and Fabian Valencia in IMF Working Paper , November 2008

This paper presents a new database on the timing of systemic banking crises and policy responses to resolve them. The database covers the universe of systemic banking crises for the period 1970-2007, with detailed data on crisis containment and resolution policies for 42 crisis episodes, and also includes data on the timing of currency crises and s...  

This Time is Different: A Panoramic View of Eight Centuries of Financial Crises by Carmen M. Reinhart and Kenneth S. Rogoff in Harvard University Working Paper , April 2008

This paper offers a “panoramic” analysis of the history of financial crises dating from England’s fourteenth-century default to the current United States sub-prime financial crisis. Our study is based on a new dataset that spans all regions. It incorporates a number of important credit episodes seldom covered in the literature, including for exampl...  

Using Monetary Policy to Stabilize Economic Activity by Carl E. Walsh in Federal Reserve Bank of Kansas City Symposium , August 2009

This essay examines the role of monetary policy in stabilizing real economic activity. The author discusses the consensus on monetary policy that developed over the last twenty years. He then examines monetary policy when the policy interest rate has fallen to zero. The paper also assess issues relevant for post-crisis monetary policy.

Where We Go from Here: The Crisis and Beyond by Richard W. Fisher in Federal Reserve Bank of Dallas Speech , March 2010

Remarks before the Eller College of Management, University of Arizona

Booms and Busts: The Case of Subprime Mortgages by Edward M. Gramlich in Federal Reserve Bank of Kansas City Economic Review , September 2007

Booms and busts have played a prominent role in American economic history. In the 19th century, the United States benefited from the canal boom, the railroad boom, the minerals boom, and a financial boom. The 20th century brought another financial boom, a postwar boom, and a dot-com boom. The details differed, but each of these cases featured init...  

Central Bank Tools and Liquidity Shortages by Stephen G. Cecchetti and Piti Disyatat in Federarl Reserve Bank of New York Economic Policy Review , October 2009

The global financial crisis that began in mid-2007 has renewed concerns about financial instability and focused attention on the fundamental role of central banks in preventing and managing systemic crises. In response to the turmoil, central banks have made extensive use of both new and existing tools for supplying central bank money to financial ...  

Changes in the U.S. Financial System and the Subprime Crisis by Jan Kregel in Levy Economics Institute Working Paper , April 2008

The paper provides a background to the forces that have produced the present system of residential housing finance, the reasons for the current crisis in mortgage financing, and the impact of the crisis on the overall financial system.

The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis by Atif R. Mian, Amir Sufi in SSRN Working Paper , December 2008

We conduct a within-county analysis using detailed zip code level data to document new findings regarding the origins of the biggest financial crisis since the Great Depression. The recent sharp increase in mortgage defaults is significantly amplified in subprime zip codes, or zip codes with a disproportionately large share of subprime borrowers as...  

Counterparty Risk in the Over-The-Counter Derivatives Market by Miguel A. Segoviano and Manmohan Singh in IMF Working Paper , November 2008

The financial market turmoil of recent months has highlighted the importance of counterparty risk. Here, we discuss counterparty risk that may stem from the OTC derivatives markets and attempt to assess the scope of potential cascade effects. This risk is measured by losses to the financial system that may result via the OTC derivative contracts fr...  

The Credit Crisis and Cycle Proof Regulation by Raghuram G. Rajan in Federal Reserve Bank of St. Louis Review , September 2009

Rajan offers what he called "cycle proof regulation" to help head off a future crisis. Among other things, he proposed: -Highly leveraged financial institutions would be required to buy fully collateralized insurance. This insurance would inject contingent capital into those institutions when they're in trouble. -Financial institutions considered...  

The Credit Crisis: Conjectures about Causes and Remedies by Douglas W. Diamond and Raghuram G. Rajan in AEA Presentation Paper , December 2008

What caused the financial crisis that is sweeping across the world? What keeps asset prices and lending depressed? What can be done to remedy matters? While it is too early to arrive at definite answers to these questions, the focus of this paper is to offer offer informed conjectures.

Did Credit Scores Predict the Subprime Crisis? by Yuliya Demyanyk in Federal Reserve Bank of St. Louis Regional Economist , October 2008

One might expect to find a connection between borrowers' FICO scores and the incidence of default and foreclosure during the current crisis. The data don't show such a cause and effect, however.

Did Prepayments Sustain the Subprime Market? by Geetesh Bhardwaj and Rajdeep Sengupta in Federal Reserve Bank of St. Louis Working Paper , October 2008

This paper demonstrates that the reason for widespread default of mortgages in the subprime market was a sudden reversal in the house price appreciation of the early 2000's. Using loan-level data on subprime mortgages, we observe that the majority of subprime loans were hybrid adjustable rate mortgages, designed to impose substantial financial ...  

The Fed's Expanded Balance Sheet by Brian P. Sack in Federal Reserve Bank of New York Speech , December 2009

The Fed’s balance sheet has moved to the forefront of its policy efforts. Accordingly, to understand the policy choices that lie ahead for the Federal Reserve, one has to understand how the balance sheet got to where it is and what effects it has had on financial markets.

Financial Crises and Economic Activity by Stephen G. Cecchetti, Marion Kohler and Christian Upper in Federal Reserve Bank of Kansas City Symposium , August 2009

The authors use historical data to examine past systemic banking crises and compare them to the current crisis. They also look at the long-term effects of a crisis on economic output.

The Financial Crisis and the Policy Response: An Empirical Analysis of What Went Wrong by John B. Taylor in Stanford University Working Paper , November 2008

This paper is an empirical investigation of the role of government actions and interventions in the financial crisis that flared up in August 2007.

Financial Reform or Financial Dementia? by Richard W. Fisher in Federal Reserve Bank of Dallas Speech , June 2010

Remarks at the SW Graduate School of Banking 53rd Annual Keynote Address and Banquet

Fixing Finance: A Roadmap for Reform by Robert E. Litan and Martin N. Baily in Brookings Institution , February 2009

This paper suggests a roadmap for reform of the financial system. The authors suggest that the guiding principles should be market discipline and sound regulation, and provide a detailed outline for changes in financial policy.

Has Financial Development Made the World Riskier? by Raghuram G. Rajan in Federal Reserve Bank of Kansas City's Symposium: The Greenspan Era: Lessons for the Future , August 2005

This paper (written pre-crisis in 2005) examines the revolutionary changes in financial systems around the world, such as greater borrowing at lower rates, the multitude of investment options catering to every possible profile of risk and return, and the ability to share risks with strangers from across the globe. The author questions the costs of...  

Has the Recent Real Estate Bubble Biased the Output Gap? by Chanont Banternghansa and Adrian Peralta-Alva in Federal Reserve Bank of St. Louis Economic Synopses , December 2009

The authors offer a word of caution to policymakers: Policies based on point estimates of the output gap may not rest on solid ground.

Hedge Funds, Systemic Risk, and the Financial Crisis of 2007-2008 by Andrew W. Lo in U.S. House Committee on Oversight and Government Reform , November 2008

This article is the written testimony of Andrew Lo on the role of hedge funds in the U.S. financial system and their regulation. For the preliminary transcript, see http://oversight.house.gov/documents/20081114143312.pdf

The Information Value of the Stress Test and Bank Opacity by Stavros Peristiani, Donald P. Morgan, and Vanessa Savino in Federal Reserve Bank of New York Staff Reports, no. 460 , July 2010

We investigate whether the “stress test,” the extraordinary examination of the nineteen largest U.S. bank holding companies conducted by federal bank supervisors in 2009, produced information demanded by the market. Using standard event study techniques, we find that the market had largely deciphered on its own which banks would have capital ga...  

Lessons for the Future from the Financial Crisis by Eric S. Rosengren in Speech before Massachusetts Newspaper Publishers Association Annual Meeting , December 2009

In a storytelling format, Rosengren explains why it was necessary to “bail out” certain firms – like AIG – and what this story teaches us about avoiding such necessities in the future. Also, why the Federal Reserve took such aggressive action to dramatically expand its balance sheet to address the crisis – and what implications and effects we expe...  

Making Sense of the Subprime Crisis by Kristopher S. Gerardi, Andreas Lehnert, Shane M. Sherland, and Paul S. Willen in Federal Reserve Bank of Boston Working Paper , December 2008

This paper explores the question of whether market participants could have or should have anticipated the large increase in foreclosures that occurred in 2007 and 2008. Most of these foreclosures stem from loans originated in 2005 and 2006, leading many to suspect that lenders originated a large volume of extremely risky loans during this period. ...  

Monetary Policy and the Housing Bubble by Ben S. Bernanke in Board of Governors Speech , January 2010

Speech given at the Annual Meeting of the American Economic Association, Atlanta, Georgia

Quick Exits of Subprime Mortgages by Yuliya S. Demyanyk in Federal Reserve Bank of St. Louis Review , March 2009

All holders of mortgage contracts, regardless of type, have three options: keep their payments current, prepay (usually through refinancing), or default on the loan. The latter two options terminate the loan. The termination rates of subprime mortgages that originated each year from 2001 through 2006 are surprisingly similar: about 20, 50, and 8...  

Regulation and Its Discontents by Kevin Warsh in Board of Governors Speech , February 2010

At the New York Association for Business Economics, New York, New York

Rethinking Capital Regulation by Anil K. Kashyap, Raghuram G. Rajan and Jeremy C. Stein in Federal Reserve Bank of Kansas City's Symposium: Maintaining Stability in a Changing Financial System , September 2008

Recent estimates suggest that U.S. banks and investment banks may lose up to $250 billion from their exposure to residential mortgages securities. The resulting depletion of capital has led to unprecedented disruptions in the market for interbank funds and to sharp contractions in credit supply, with adverse consequences for the larger economy. A n...  

The Rise in Mortgage Defaults by Chris Mayer, Karen Pence and Shane M. Sherlund in Federal Reserve Board Finance and Economics Discussion Series , November 2008

The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income.

The Subprime Crisis: Cause, Effect and Consequences by R. Christopher Whalen in SSRN Working Paper , June 2008

Despite the considerable media attention given to the collapse of the market for complex structured assets that contain subprime mortgages, there has been too little discussion of why this crisis occurred. The Subprime Crisis: Cause, Effect and Consequences argues that three basic issues are at the root of the problem, the first of which is an odio...  

Subprime Facts: What (We Think) We Know about the Subprime Crisis and What We Don't by Christopher L. Foote, Kristopher Gerardi, Lorenz Goette and Paul S. Willen in Federal Reserve Bank of Boston Public Policy Discussion Paper , May 2008

Using a variety of datasets, the authors document some basic facts about the current subprime crisis. Many of these facts are applicable to the crisis at a national level, while some illustrate problems relevant only to Massachusetts and New England. The authors conclude by discussing some outstanding questions about which the data, which they beli...  

Subprime Lending and Real Estate Markets by Susan M. Wachter, Andrey D. Pavlov, and Zoltan Pozsar in SSRN Working Paper , December 2008

The recent credit crunch, and liquidity deterioration, in the mortgage market have led to falling house prices and foreclosure levels unprecedented since the Great Depression. A critical factor in the post-2003 house price bubble was the interaction of financial engineering and the deteriorating lending standards in real estate markets, which fed o...  

Subprime Outcomes: Risky Mortgages, Homeownership Experiences, and Foreclosures by Kristopher Gerardi, Adam Hale Shapiro and Paul S. Willen in Federal Reserve Bank of Boston Working Paper , May 2008

This paper provides the first rigorous assessment of the homeownership experiences of subprime borrowers. We consider homeowners who used subprime mortgages to buy their homes, and estimate how often these borrowers end up in foreclosure. In order to evaluate these issues, we analyze homeownership experiences in Massachusetts over the 1989–2007 per...  

The Subprime Turmoil: What's Old, What's New, and What's Next by Charles W. Calomiris in Federal Reserve Bank of Kansas City's Symposium: Maintaining Stability in a Changing Financial System" , October 2008

We are currently experiencing a major shock to the financial system, initiated by problems in the subprime market, which spread to securitization products and credit markets more generally. Banks are being asked to increase the amount of risk that they absorb (by moving off-balance sheet assets onto their balance sheets), but losses that the banks...  

U.S. Monetary Policy and the Financial Crisis by James R. Lothian in Federal Reserve Bank of Atlanta CenFIS Working Paper , December 2009

This paper reviews U.S. Federal Reserve policy prior to and during the course of the recession that began in December 2007. It compares those policies to monetary policy during the Great Depression of the 1930s, with which this recession has been likened. The paper then discusses what policymakers will need to do to in future to avoid a surge in in...  

Understanding the Securitization of Subprime Mortgage Credit by Adam B. Ashcraft and Til Schuermann in Federal Reserve Bank of New York Staff Reports , March 2008

In this paper, the authors provide an overview of the subprime mortgage securitization process and the seven key informational frictions that arise. They discuss the ways that market participants work to minimize these frictions and speculate on how this process broke down. They continue with a complete picture of the subprime borrower and the subp...  

Understanding the Subprime Mortgage Crisis by Yuliya Demyanyk and Otto Van Hemert in SSRN Working Paper , December 2008

In this paper the authors provide evidence that the rise and fall of the subprime mortgage market follows a classic lending boom-bust scenario, in which unsustainable growth leads to the collapse of the market. Problems could have been detected long before the crisis, but they were masked by high house price appreciation between 2003 and 2005.

What to Do about Systemically Important Financial Institutions by James B. Thomson in Federal Reserve Bank of Cleveland , August 2009

The Federal Reserve Bank of Cleveland is proposing a three-tiered system for regulating systemically important financial institutions. Tier one would include high-risk institutions, such as large, interstate banks and multi-state insurance companies. Tier two would include moderately complex financial institutions, such as larger regional banks. An...  

Where's the Smoking Gun? A Study of Underwriting Standards for US Subprime Mortgages by Geetesh Bhardwaj and Rajdeep Sengupta in Federal Reserve Bank of St. Louis Working Paper , October 2008

The dominant explanation for the meltdown in the US subprime mortgage market is that lending standards dramatically weakened after 2004. Using loan-level data, Bhardwaj and Sengupta examine underwriting standards on the subprime mortgage originations from 1998 to 2007. Contrary to popular belief, the authors find no evidence of a dramatic weakening...  

Have the Fed Liquidity Facilities Had an Effect on Libor? by Jens Christensen in Federal Reserve Bank of San Francisco Economic Letter , August 2009

In response to turmoil in the interbank lending market, the Federal Reserve inaugurated programs to bolster liquidity beginning in December 2007. Research offers evidence that these liquidity facilities have helped lower the London interbank offered rate, a key market benchmark, significantly from what it otherwise would have been expected to be.

Macroprudential Supervision of Financial Institutions: Lessons from the SCAP by Beverly Hirtle, Til Schuermann, and Kevin Stiroh in Federal Reserve Bank of New York Staff Reports , November 2009

A fundamental conclusion drawn from the recent financial crisis is that the supervision and regulation of financial firms in isolation—a purely microprudential perspective—are not sufficient to maintain financial stability. Rather, a macroprudential perspective, which evaluates and responds to the financial system as a whole, seems necessary, and t...  

Paulson’s Gift by Pietro Veronesi and Luigi Zingales in NBER Working Paper , October 2009

The authors calculate the costs and benefits of the largest ever U.S. Government intervention in the financial sector announced the 2008 Columbus-day weekend. They estimate that this intervention increased the value of banks’ financial claims by $131 billion at a taxpayers’ cost of $25 -$47 billions with a net benefit between $84bn and $107bn. B...  

Quantitative Easing—Uncharted Waters for Monetary Policy by James Bullard in Federal Reserve Bank of St. Louis Regional Economist , January 2010

A discussion of the use of quantiative easing in monetary policy

What the Libor-OIS Spread Says by Daniel L. Thornton in Federal Reserve Bank of St. Louis Economic Synopses , May 2009

This paper offers a discussion of the current Libor-OIS rate spread, and what that rate implies for the health of banks.

Possible Solutions / Next Steps

Addressing TBTF by Shrinking Financial Institutions: An Initial Assessment by Gary H. Stern and Ron Feldman in Federal Reserve Bank of Minneapolis , May 2009

In this essay, the authors review concerns about the "make-them-smaller" reform. They recommend several interim steps to address TBTF that share some similarities with the make-them-smaller approach but do not have the same failings. Specifically, they support (1) imposing special deposit insurance assessments for TBTF banks to allow for spillover-...  

Aiding the Economy: What the Fed Did and Why by Ben S. Bernanke in Board of Governors , November 2010

Federal Reserve Chairman Bernanke's Op-ed column published in The Washington Post on November 4, 2010

Are All the Sacred Cows Dead? Implications of the Financial Crisis for Macro and Financial Policies by Asli Demirgüç-Kunt and Luis Servén in World Bank Policy Research Working Paper , January 2009

The recent global financial crisis has shaken the confidence of developed and developing countries alike in the very blueprint of financial and macro policies that underlie the western capitalist systems. In an effort to contain the crisis from spreading, the authorities in the US and many European governments have taken unprecedented steps of prov...  

As In the Past, Reform Will Follow Crisis by James Bullard in Federal Reserve Bank of St. Louis Regional Economist , July 2009

Historically, crises have led to significant legislation. The current financial crisis will undoubtedly spur further regulation. Successful regulation should be aimed not at preventing all failures, but rather at establishing a clear and credible process such that if a failure were to occur, it would take place in an orderly fashion and not cause i...  

Asset Bubbles and Systemic Risk by Eric S. Rosengren in Federal Reserve Bank of Boston Speech , March 2010

The Global Interdependence Center's Conference on "Financial Interdependence in the World's Post-Crisis Capital Markets" Philadelphia, Pennsylvania

Bank Capital: Lessons from the Financial Crisis by Asli Demirguc-Kunt, Enrica Detragiache, Ouarda Merrouche in World Bank Policy Research Working Paper, WPS5473 , November 2010

Using a multi-country panel of banks, the authors study whether better capitalized banks fared better in terms of stock returns during the financial crisis.

Bank Relationships and the Depth of the Current Economic Crisis by Julian Caballero, Christopher Candelaria, and Galina Hale in Federal Reserve Bank of San Francisco Economic Letter , December 2009

The financial crisis has been worldwide in scope, but the severity has differed from country to country. Those countries whose banks played a more central role in the global financial system, were important intermediaries, or had extensive direct relationships tended to be less seriously affected, as measured by the extent of the decline in their s...  

Buying Troubled Assets by Lucian A. Bebchuk in Harvard Law and Economics Discussion Paper (via SSRN) , April 2009

This paper analyzes how government intervention in the market for banks’ troubled assets is best designed, and also uses this analysis to evaluate the public-private investment program announced by the U.S. government in March 2009. The author begins by presenting the case for using government funds to restart the market for troubled assets. He the...  

Can Monetary Policy Affect GDP Growth? by Yi Wen in Federal Reserve Bank of St. Louis Economic Synopses , April 2009

Discusses whether the growth of the monetary base is associated with gaster growth of real output.

Challenges for monetary policy in EMU by Axel Weber in Homer Jones Memorial Lecture , April 2011

Bundesbank President discussed the financial crisis and its lessons for monetary policy in a lecture at the St. Louis Fed.

The Changing Nature of Financial Intermediation and the Financial Crisis of 2007-09 by Tobias Adrian and Hyun Song Shin in Federal Reserve Bank of New York Staff Reports , March 2010

The financial crisis of 2007-09 highlighted the changing role of financial institutions and the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend was most pronounced in the United States, but it also had a profound influence o...  

The Consolidation of Financial Market Regulation: Pros, Cons, and Implications for the United States by Sabrina R. Pellerin, John R. Walter, and Patricia E. Wescott in Federal Reserve Bank of Richmond Working Paper , May 2009

The U.S. financial system has changed significantly over the last several decades without any major structural changes to the decentralized financial regulatory system, despite numerous proposals. In the past decade, many countries have chosen to consolidate their regulators into a newly formed "single regulator" or have significantly reduced the n...  

Cracks in the System: Repairing the Damaged Global Economy by Olivier Blanchard in International Monetary Fund: Finance and Development , December 2008

The financial crisis has exposed weaknesses in the current regulatory and supervisory frameworks, which have made clear that action is needed to reduce the risk of crises and to address them when they occur.

Credible Alertness Revisited by Jean-Claude Trichet in Federal Reserve Bank of Kansas City Symposium , August 2009

A discussion of three issues facing central banks: the relationship between asset prices and monetary policy; the effectiveness of the standard interest rate instrument; and the design of non-standar monetary policy measures such as the ECB's enhanced credit support.

Credit Derivatives: Systemic Risks and Policy Options by John Kiff, Jennifer Elliott, Elias Kazarian, Jodi Scarlata, and Carolyne Spackman in IMF Working Paper , November 2009

Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this “hands off” stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase ...  

The Crisis by Alan Greenspan in Brookings Papers on Economic Activity , April 2010

To prevent a future financial crisis, the primary imperative must be increased regulatory capital and liquidity requirements on banks and significant increases in collateral requirements for globally traded financial products, irrespective of the financial institutions making the trades, Greenspan says. He offers his views about regulatory reform,...  

Emerging from the Crisis: Where Do We Stand? by Ben S. Bernanke in Board of Governors Speech , November 2010

Speech by Federal Reserve Chairman at the Sixth European Central Bank Central Banking Conference, Frankfurt, Germany

The Fed at a Crossroads by James Bullard in Federal Reserve Bank of St. Louis Speech , March 2010

Remarks at St. Cloud State University's 48th annual Winter Institute

Fed Confronts Financial Crisis by Expanding Its Role as Lender of Last Resort by John V. Duca, Danielle DiMartino and Jessica J. Renier in Federal Reserve Bank of Dallas Economic Letter , February 2009

The unprecedented actions the Fed has taken to combat the financial crisis have had some success in unclogging the economy's financial arteries, according to this article.

Federal Reserve Liquidity Programs: An Update by Niel Willardson and LuAnne Pederson in The Region (Federal Reserve Bank of Minneapolis) , June 2010

A review of the size, status and results of the Fed's programs to cope with crisis

The Federal Reserve's Asset Purchase Program by Janet Yellen in Speech at the The Brimmer Policy Forum, Allied Social Science Associations Annual Meeting, Denver, Colorado , January 2011

Yellen discusses the rationale for the decision by the Federal Open Market Committee (FOMC) in November 2010 to initiate a new program of asset purchases, and addresses questions (FAQs) regarding the program's economic and financial effects both in the U.S. and abroad.

The Federal Reserve's Liquidity Facilities by William C. Dudley in Speech , April 2009

Remarks at the Vanderbilt University Conference on Financial Markets and Financial Policy Honoring Dewey Daane, Nashville, Tennessee

The Federal Reserve's Policy Actions during the Financial Crisis and Lessons for the Future by Donald L. Kohn in Board of Governors Speech , May 2010

Speech at the Carleton University, Ottawa, Canada

The Financial Crisis and the Recession: What is Happening and What the Government Should Do by Robert E. Hall and Susan E. Woodward

Woodward and Hall frequently update a document on the crisis and recession. The highlights of the document are: Low interest rates in the early part of the decade were responsible monetary policy to head off deflation, not an irresponsible contribution to a housing price bubble. The most important fact about the economy today is the collapse of s...  

The Financial Crisis of 2008: What Needs to Happen after TARP by Campbell R. Harvey in Duke University Working Paper , October 2008

Harvey argues that the Trouble Asset Relief Program (TARP), signed into law on October 3, 2008, is an insufficient policy initiative to end the current credit crisis. In addition to modifications in implementing the program, other policy initiatives are necessary. Harvey sets forth several proposals to help end the crisis.

Fiscal Responsibility and Global Rebalancing by Janet L. Yellen in Federal Reserve Board of Governors , December 2010

Speech by Federal Reserve System Board of Governors Vice Chair at the Committee for Economic Development 2010 International Counterparts Conference, New York, New York .

The Future of Securities Regulation by Luigi Zingales in University of Chicago Working Paper , January 2009

The U.S. system of securities law was designed more than 70 years ago to regain investors’ trust after a major financial crisis. Today we face a similar problem. But while in the 1930s the prevailing perception was that investors had been defrauded by offerings of dubious quality securities, in the new millennium, investors’ perception is that they...  

The High Cost of Exceptionally Low Rates by Thomas M. Hoenig in Federal Reserve Bank of Kansas City , June 2010

Speech at Bartlesville Federal Reserve Forum

Implementing a Macroprudential Approach to Supervision and Regulation by Ben S. Bernanke in Federal Reserve Board of Governors Speech , May 2011

Speech at the 47th Annual Conference on Bank Structure and Competition, Chicago, Illinois

Implications of the Financial Crisis for Economics by Ben S. Bernanke in Board of Governors Speech , September 2010

Speech at the Conference Co-sponsored by the Center for Economic Policy Studies and the Bendheim Center for Finance, Princeton University, Princeton, New Jersey

Implications of the Financial Crisis for Potential Growth: Past, Present, and Future by Charles Steindel in Federal Reserve Bank of New York Staff Reports , November 2009

The scale of the recent collapse in asset values and the magnitude of the recession suggest that activities connected to the increase in values over the 2002-07 period—notably, expansion of the financial markets, homebuilding, and real estate—were overstated. If this is true, aggregate U.S. economic growth would have been overstated, implying that ...  

Improving the International Monetary and Financial System by Janet L. Yellen in Speech at the Banque de France International Symposium, Paris, France , March 2011

In this speech Yellen contributes her thoughts on steps we can take to improve our international economic order. In the case of the recent global financial crisis and recession, she apportions responsibility to inadequacies in both the monetary and financial systems.

It's Greek to Me by Kevin Warsh in Board of Governors Speech , June 2010

At the Atlanta Rotary Club, Atlanta, Georgia

The Lack of an Empirical Rationale for a Revival of Discretionary Fiscal Policy by John B. Taylor in AEA Presentation Paper , January 2009

Despite this widespread agreement of a decade ago, there has recently been a dramatic revival of interest in discretionary fiscal policy. The purpose of this paper is to review the empirical evidence during the past decade and determine whether it calls for such a revival. Taylor finds that it does not.

The macroeconomics of financial crises: How risk premiums, liquidity traps and perfect traps affect policy options by Manfred Gärtner und Florian Jung in University of St. Gallen Discussion Paper , July 2009

The paper shows that structural models of the IS-LM and Mundell-Fleming variety have a lot to tell about the macroeconomics of the current global crisis. In addition to demonstrating how the emergence of risk premiums in money and capital markets may drive economies into recessions, it shows the following: (1) Liquidity traps may occur not only whe...  

Monetary Policy Research and the Financial Crisis: Strengths and Shortcomings by Donald L. Kohn in Speech, Board of Governors , October 2009

Kohn, in his speech, asks "What aspects of the existing literature in monetary economics have been particularly helpful in formulating the course of monetary policy since the onset of the financial crisis? Second, what are the gaps in this literature that have become particularly evident since the onset of the financial crisis and, therefore, would...  

Monetary Policy Stance: The View from Consumption Spending by William T. Gavin in Federal Reserve Bank of St. Louis Economic Synopses , October 2009

The author suggests that we should expect a third business cycle in succession in which the real federal funds rate reaches its trough well after the economy begins to recover

Mortgage Choice and the Pricing of Fixed-Rate and Adjustable-Rate Mortgages by John Krainer in Federal Reserve Bank of San Francisco Economic Letter , February 2010

In the United States throughout 2009, the share of adjustable-rate mortgages among total mortgage originations was very low, apparently reflecting the attractive pricing of fixed-rate mortgages relative to ARMs. Government policy could have changed the relative attractiveness of the fixed-rate mortgages and ARMs, thereby shifting the market share o...  

Negating the Inflation Potential of the Fed’s Lending Programs by Daniel L. Thornton in Federal Reserve Bank of St. Louis Economic Synopses , July 2009

The Term Auction Facility (TAF), instituted in December 2007, was the first in a series of Fed lending facilities designed to allocate credit (and thus liquidity) to certain institutions and markets. The most recent of these lending facilities is the Term Asset-Backed Securities Loan Facility (TALF), which began operation in March 2009. Initiall...  

The New Shape of the Economic and the Financial Governance in the EU by Olli Rehn in Institute of International Finance , October 2010

Keynote Speech by EU Economic & Monetary Affairs Commissioner at The Annual Meeting Institute of International Finance

On the Record with Bernanke in PBS NewsHour Forum , July 2009

At a forum in Kansas City, Mo., Federal Reserve Chairman Ben Bernanke discussed the central bank's actions in handling the economic crisis, saying he did not want to be the Fed chief who "presided over the second Great Depression." Here is the full transcript of the forum, which was moderated by Jim Lehrer.

Paradise Lost: Addressing ‘Too Big to Fail’ (With Reference to John Milton and Irving Kristol) by Richard W. FIsher in Remarks before the Cato Institute’s 27th Annual Monetary Conference , November 2009

"In the words of Milton, I would say that regulation should be designed to enable financial institutions to be 'sufficient to have stood, though free to fall.'"

A Plan for Addressing the Financial Crisis by Lucian A. Bebchuk in Harvard Law School Working Paper , September 2008

This paper critiques the proposed emergency legislation for spending $700 billion on purchasing financial firms’ troubled assets to address the 2008 financial crisis. It also puts forward an alternative for advancing the two goals of the proposed legislation – restoring stability to the financial markets and protecting taxpayers.

Preventing Future Crises by Noel Sacasa in International Monetary Fund: Finance and Development , December 2008

This article takes a look at substantive issues in the current debates on reforming the financial sector. The first section identifies crucial weaknesses that the reforms need to address, and the second outlines key areas for policy action.

The Public Policy Case for a Role for the Federal Reserve in Bank Supervision and Regulation by Ben S. Bernanke in Board of Governors , January 2010

The Board's views on the importance of the Federal Reserve's continued role in bank supervision and regulation. The document discusses (1) how the expertise and information that the Federal Reserve develops in the making of monetary policy enable it to make a unique contribution to an effective regulatory regime, especially in the context of a more...  

Rebalancing the Global Recovery by Ben S. Bernanke in Board of Governors , November 2010

Speech by the Federal Reserve Chairman at the Sixth European Central Bank Central Banking Conference, Frankfurt, Germany

Regulating Systemic Risk by Governor Daniel K. Tarullo in Speech at the 2011 Credit Markets Symposium, Charlotte, North Carolina , March 2011

This speech addresses the implementation of the new statutory regime for special supervision and regulation of financial institutions whose stress or failure could pose a risk to financial stability.

The Regulatory Response to the Financial Crisis: An Early Assessment by Jeffrey M. Lacker in The Institute for International Economic Policy and the International Monetary Fund Institute , May 2010

Assessment of the regulatory response to this crisis will depend predominantly on how well it clarifies and places discernable boundaries around the federal financial safety net.

Remarks on "The Squam Lake Report: Fixing the Financial System" by Ben S. Bernanke in Board of Governors Speech , June 2010

At the Squam Lake Conference, New York, New York

Report on the Lessons Learned from the Financial Ccrisis with Regard to the Functioning of European Financial Market Infrastructures by European Central Bank in European Central Bank , April 2010

This report considers issues relating to the impact of the financial crisis on the functioning of European financial market infrastructures (FMIs), including systemically important payment systems, central counter parties, and securities settlement systems.

Second Chances: Subprime Mortgage Modification and Re-Default by Andrew Haughwout, Ebiere Okah, and Joseph Tracy in Federal Reserve Bank of New York Staff Reports , December 2009

Mortgage modifications have become an important component of public interventions designed to reduce foreclosures. In this paper, we examine how the structure of a mortgage modification affects the likelihood of the modified mortgage re-defaulting over the next year. Using data on subprime modifications that precede the government’s Home Affordable...  

Securitization Markets and Central Banking: An Evaluation of the Term Asset-Backed Securities Loan Facility by Sean Campbell, Daniel Covitz, William Nelson, and Karen Pence in Finance & Economic Discussion Series, #2011-16 , January 2011

This working paper studies the effects of the Term Asset-Backed Securities Loan Facility and finds that it lowered interest rate spreads for some categories of asset-backed securities but had little impact on the pricing of individual securities.

Seeking Stability: What's Next for Banking Regulation? by Simona E. Cociuba in Federal Reserve Bank of Dallas Economic Letter , April 2009

Cociuba reviews the Basel I regulatory framework, and then considers some of the improvements and shortcomings of Basel II. Cociuba then presents the example of Northern Rock to illustrate the shortcomings of Basel I, before considering what the future of bank regulation should look like.

Still More Lessons from the Crisis by William C. Dudley in Federal Reserve Bank of New York Speech , December 2009

Remarks at the Columbia University World Leaders Forum, New York, New York

The Success of the CPFF? by Richard G. Anderson in Federal Reserve Bank of St. Louis Economic Synopses , April 2009

Describes the Commercial Paper Funding Facility and its effect on the availability of commercial credit.

Uncertainty About When the Fed Will Raise Interest Rates by Michael W. McCracken in Federal Reserve Bank of St. Louis Economic Synopses , June 2009

In response to the current economic crisis, the Federal Reserve has reduced its federal funds rate (FFR) target to zero. With the FFR at zero and a negative rate practically infeasible, the Fed is now in largely uncharted territory when conducting monetary policy. Other types of policies are now the focus of attention.

What's Under the TARP? by Craig P. Aubuchon in Federal Reserve Bank of St. Louis Economic Synopses , April 2009

This article provides an outline of the TARP plan and the Financial Stability Plan.

Will Regulatory Reform Prevent Future Crises? by James Bullard in Federal Reserve Bank of St. Louis Speech , February 2010

Remarks at CFA Virginia Society, Richmond, Virginia

Will the U.S. Bank Recapitalization Succeed? Lessons from Japan by Takeo Hoshi and Anil K. Kashyap in NBER Working Paper , December 2008

The U.S. government is using a variety of tools to try to rehabilitate the U.S. banking industry. The two principal policy levers discussed so far are employing asset managers to buy toxic real estate securities and making bank equity purchases. Japan used both of these strategies to combat its banking problems. There are also a surprising number o...  

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The Financial Crisis the World Forgot

The Federal Reserve crossed red lines to rescue markets in March 2020. Is there enough momentum to fix the weaknesses the episode exposed?

Credit... Jasper Rietman

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By Jeanna Smialek

• Published March 16, 2021 Updated March 17, 2021

By the middle of March 2020 a sense of anxiety pervaded the Federal Reserve. The fast-unfolding coronavirus pandemic was rippling through global markets in dangerous ways.

Trading in Treasurys — the government securities that are considered among the safest assets in the world, and the bedrock of the entire bond market — had become disjointed as panicked investors tried to sell everything they owned to raise cash. Buyers were scarce. The Treasury market had never broken down so badly, even in the depths of the 2008 financial crisis.

The Fed called an emergency meeting on March 15, a Sunday. Lorie Logan, who oversees the Federal Reserve Bank of New York’s asset portfolio, summarized the brewing crisis. She and her colleagues dialed into a conference from the fortresslike New York Fed headquarters, unable to travel to Washington given the meeting’s impromptu nature and the spreading virus. Regional bank presidents assembled across America stared back from the monitor. Washington-based governors were arrayed in a socially distanced ring around the Fed Board’s mahogany table.

Ms. Logan delivered a blunt assessment: While the Fed had been buying government-backed bonds the week before to soothe the volatile Treasury market, market contacts said it hadn’t been enough. To fix things, the Fed might need to buy much more . And fast.

Fed officials are an argumentative bunch, and they fiercely debated the other issue before them that day, whether to cut interest rates to near zero.

But, in a testament to the gravity of the breakdown in the government bond market, there was no dissent about whether the central bank needed to stem what was happening by stepping in as a buyer. That afternoon, the Fed announced an enormous purchase program , promising to make $500 billion in government bond purchases and to buy $200 billion in mortgage-backed debt.

It wasn’t the central bank’s first effort to stop the unfolding disaster, nor would it be the last. But it was a clear signal that the 2020 meltdown echoed the 2008 crisis in seriousness and complexity. Where the housing crisis and ensuing crash took years to unfold, the coronavirus panic had struck in weeks.

As March wore on, each hour incubating a new calamity, policymakers were forced to cross boundaries, break precedents and make new uses of the U.S. government’s vast powers to save domestic markets, keep cash flowing abroad and prevent a full-blown financial crisis from compounding a public health tragedy.

The rescue worked, so it is easy to forget the peril America’s investors and businesses faced a year ago. But the systemwide weaknesses that were exposed last March remain, and are now under the microscope of Washington policymakers.

How It Started

Financial markets began to wobble on Feb. 21, 2020, when Italian authorities announced localized lockdowns.

At first, the sell-off in risky investments was normal — a rational “flight to safety” while the global economic outlook was rapidly darkening. Stocks plummeted, demand for many corporate bonds disappeared, and people poured into supersecure investments, like U.S. Treasury bonds.

On March 3, as market jitters intensified, the Fed cut interest rates to about 1 percent — its first emergency move since the 2008 financial crisis. Some analysts chided the Fed for overreacting , and others asked an obvious question: What could the Fed realistically do in the face of a public health threat?

“We do recognize that a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain,” Chair Jerome H. Powell said at a news conference, explaining that the Fed was doing what it could to keep credit cheap and available.

But the health disaster was quickly metastasizing into a market crisis.

Lockdowns in Italy deepened during the second week of March, and oil prices plummeted as a price war raged, sending tremors across stock, currency and commodity markets. Then, something weird started to happen: Instead of snapping up Treasury bonds, arguably the world’s safest investment, investors began trying to sell them.

The yield on 10-year Treasury debt — which usually drops when investors seek safe harbor — started to rise on March 10, suggesting investors didn’t want safe assets. They wanted cold, hard cash, and they were trying to sell anything and everything to get it.

How It Worsened

Religion works through churches. Democracy through congresses and parliaments. Capitalism is an idea made real through a series of relationships between debtors and creditors, risk and reward. And by March 11 last year, those equations were no longer adding up.

That was the day the World Health Organization officially declared the virus outbreak a pandemic, and the morning on which it was becoming clear that a sell-off had spiraled into a panic.

The Fed began to roll out measure after measure in a bid to soothe conditions, first offering huge temporary infusions of cash to banks, then accelerating plans to buy Treasury bonds as that market swung out of whack.

But by Friday, March 13, government bond markets were just one of many problems.

Investors had been pulling their cash from prime money market mutual funds, where they park it to earn a slightly higher return, for days. But those outflows began to accelerate, prompting the funds themselves to pull back sharply from short-term corporate debt markets as they raced to return money to investors. Banks that serve as market conduits were less willing than usual to buy and hold new securities, even just temporarily. That made it harder to sell everything, be it a company bond or Treasury debt.

The Fed’s announcement after its March 15 emergency meeting — that it would slash rates and buy bonds in the most critical markets — was an attempt to get things under control.

But Mr. Powell worried that the fix would fall short as short- and long-term debt of all kinds became hard to sell. He approached Andreas Lehnert, director of the Fed’s financial stability division, in the Washington boardroom after the meeting and asked him to prepare emergency lending programs, which the central bank had used in 2008 to serve as a support system to unraveling markets.

Mr. Lehnert went straight to a musty office, where he communicated with Fed technicians, economists and lawyers via instant messenger and video chats — in-person meetings were already restricted — and worked late into the night to get the paperwork ready.

Starting that Tuesday morning, after another day of market carnage, the central bank began to unveil the steady drip of rescue programs that Mr. Lehnert and his colleagues had been working on: one to buy up short-term corporate debt and another to keep funding flowing to key banks. Shortly before midnight on Wednesday, March 18, the Fed announced a program to rescue embattled money market funds by offering to effectively take hard-to-sell securities off their hands.

But by the end of that week, everything was a mess. Foreign central banks and corporations were offloading U.S. debt, partly to raise dollars companies needed to pay interest and other bills; hedge funds were nixing a highly leveraged trade that had broken down as the market went haywire, dumping Treasurys into the choked market. Corporate bond and commercial real estate debt markets looked dicey as companies faced credit rating downgrades and as hotels and malls saw business prospects tank.

The world’s most powerful central bank was throwing solutions at the markets as rapidly as it could, and it wasn’t enough.

How They Fixed It

The next weekend, March 21 and 22, was a frenzy. Officials dialed into calls from home, completing still-secret program outlines and negotiating with Treasury Secretary Steven Mnuchin’s team to establish a layer of insurance to protect the efforts against credit losses. After a tormented 48-hour hustle, the Fed sent out a mammoth news release on Monday morning.

Headlines hit newswires at 8 a.m., well before American markets opened. The Fed promised to buy an unlimited amount of Treasury debt and to purchase commercial mortgage-backed securities — efforts to save the most central markets.

The announcement also pushed the central bank into uncharted territory. The Fed was established in 1913 to serve as a lender of last resort to troubled banks. On March 23, it pledged to funnel help far beyond that financial core. The Fed said it would buy corporate debt and help to get loans to midsize businesses for the first time ever.

It finally worked. The dash for cash turned around starting that day.

The March 23 efforts took an approach that Mr. Lehnert referred to internally as “covering the waterfront.” Fed economists had discerned which capital markets were tied to huge numbers of jobs and made sure that every one of them had a Fed support program.

On April 9, officials put final pieces of the strategy into play. Backed by a huge pot of insurance money from a rescue package just passed by Congress — lawmakers had handed the Treasury up to $454 billion — they announced that they would expand already-announced efforts and set up another to help funnel credit to states and big cities.

The Fed’s 2008 rescue effort had been widely criticized as a bank bailout. The 2020 redux was to rescue everything.

The Fed, along with the Treasury, most likely saved the nation from a crippling financial crisis that would have made it harder for businesses to survive, rebound and rehire, intensifying the economic damage the coronavirus went on to inflict. Many of the programs have since ended or are scheduled to do so, and markets are functioning fine.

But there’s no guarantee that the calm will prove permanent.

“The financial system remains vulnerable” to a repeat of last March’s sweeping disaster as “the underlying structures and mechanisms that gave rise to the turmoil are still in place,” the Financial Stability Board, a global oversight body, wrote in a meltdown post-mortem .

What Comes Next

The question policymakers and lawmakers are now grappling with is how to fix those vulnerabilities, which could portend problems for the Treasury market and money market funds if investors get seriously spooked again.

The Fed’s rescue ramps up the urgency to safeguard the system. Central bankers set a precedent by saving previously untouched markets, raising the possibility that investors will take risks, assuming the central bank will always step in if things get bad enough.

There’s some bipartisan appetite for reform: Trump-era regulators began a review of money markets, and Treasury Secretary Janet L. Yellen has said she will focus on financial oversight. But change won’t be easy. Protests in the street helped to galvanize financial reform after 2008. There is little popular outrage over the March 2020 meltdown, both because it was set off by a health crisis — not bad banker behavior — and because it was resolved quickly.

Industry players are already mobilizing a lobbying effort, and they may find allies in resisting regulation, including among lawmakers.

“I would point out that money market funds have been remarkably stable and successful,” Senator Patrick J. Toomey, Republican of Pennsylvania, said during a Jan. 19 hearing .

Matt Phillips contributed reporting.

Jeanna Smialek writes about the Federal Reserve and the economy. She previously covered economics at Bloomberg News, where she also wrote feature stories for Businessweek magazine. More about Jeanna Smialek

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The real effects of the financial crisis

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Ben s. bernanke ben s. bernanke distinguished senior fellow - the brookings institution, economic studies @benbernanke.

September 13, 2018

This paper is part of the Fall 2018 edition of the Brookings Papers on Economic Activity, the leading conference series and journal in economics for timely, cutting-edge research about real-world policy issues. Research findings are presented in a clear and accessible style to maximize their impact on economic understanding and policymaking. The editors are Brookings Nonresident Senior Fellow and Northwestern University Economics Professor  Janice Eberly  and  James  Stock , Brookings Nonresident Senior Fellow and Harvard University economics professor.   Read summaries of all  five papers from the journal here .

Economists both failed to predict the global financial crisis and underestimated its consequences for the broader economy. Focusing on the second of these failures, this paper make two contributions. First, I review research since the crisis on the role of credit factors in the decisions of households, firms, and financial intermediaries and in macroeconomic modeling. This research provides broad support for the view that credit-market developments deserve greater attention from macroeconomists, not only for analyzing the economic effects of financial crises but in the study of ordinary business cycles as well. Second, I provide new evidence on the channels by which the recent financial crisis depressed economic activity in the United States. Although the deterioration of household balance sheets and the associated deleveraging likely contributed to the initial economic downturn and the slowness of the recovery, I find that the unusual severity of the Great Recession was due primarily to the panic in funding and securitization markets, which disrupted the supply of credit. This finding helps to justify the government’s extraordinary efforts to stem the panic in order to avoid greater damage to the real economy.

Bernanke, Ben. 2018. “The Real Effects of the Financial Crisis.” Brookings Papers on Economic Activity , Fall, 251-342.

Conflict of Interest Disclosure

Dr. Ben S. Bernanke is a Distinguished Fellow in residence with the Economic Studies Program at the Brookings Institution, as well as a Senior Advisor to PIMCO and Citadel. The author did not receive financial support from any firm or person for this paper or from any firm or person with a financial or political interest in this paper. With the exception of the aforementioned, he is currently not an officer, director, or board member of any organization with an interest in this paper. No outside party had the right to review this paper before circulation.

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ORIGINAL RESEARCH article

Global financial crisis, smart lockdown strategies, and the covid-19 spillover impacts: a global perspective implications from southeast asia.

• 1 School of International Economics and Trade, Shanghai Lixin University of Accounting and Finance, Shanghai, China
• 2 School of Media and Communication, Shanghai Jiao Tong University, Shanghai, China
• 3 Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China
• 4 School of Economics and Management, Tongji University, Shanghai, China
• 5 School of Management, Harbin Institute of Technology, Harbin, China

This present study primarily emphasizes to seek the COVID-19 adverse impacts posing health challenges and global economic crisis. The pandemic (COVID-19) continues to hit the global economies adversely. Pakistan is the 5th-most-populous nation, and recorded positive cases with the third-highest positivity ratio in South Asia, and 26th-highest deaths toll of 21,450 and 29th number of most COVID-19 positive cases with 933,750 worldwide, as of June 6, 2021. The first wave appeared at the end of May 2020, and mid of June reported its peak, which ended by mid-July 2020. Early November 2020 witnessed the second wave with low intensity reached the climax by mid-December. The COVID-19's third wave severely affected the country during mid-March 2021. It exhibited the highest positivity rate, around 20%. New positive patients and deaths toll commenced to skyrocket and reported peak by April 15, 2021. Then situation gradually improved with effective measures and restrictions. The pandemic coronavirus (COVID-19) has affected 220 territories, regions, and countries and resulted in more than 174.116 million infections, deaths, 3.75 million, and 157.157 million positive cases fully recovered from this infectious disease, as of June 7, 2021. The pandemic has caused a severe crisis of healthcare facilities and economic challenges worldwide. Pakistani economy reported GPD's negative growth (–0.05) for the first time over the last 60 years in 2020, which caused a massive financial crisis. The Government's relief package intervened to reduce public mental stress and improve the quality of their lives. IMF reported that Pakistan's GPD bounced back at 4% growth by June 2021. This article determines that economic instability and health burden happened in Pakistan for a longer time than financial disequilibrium that occurred globally. Pakistan encountered this crisis due to its feeble healthcare systems and fragile economy. This study explores adverse health issues and spillover consequences on the economic crisis in Pakistan with global implications. It recommends smart lockdown restrictions in most affected areas to reopen the economic cycle with strict preventive measures to minimize the COVD-19 adverse consequences.

Introduction

The advent of coronavirus brought the global health emergency caused by the spread of the novel COVID-19 disease, which affected almost all the countries, including the most developed and advanced nations and the weak economies worldwide ( 1 – 5 ). This global economic crisis has had adverse effects on individuals' quality of life and mental health ( 6 – 10 ). The ongoing coronavirus (COVID-19) pandemic appeared in Wuhan (Hubei region, China), and the first case of infection was reported on December 31, 2019, in the region. The outbreak of the COVID-19 epidemic has caused a global health emergency. The pandemic coronavirus (COVID-19) has affected 220 territories, regions, and countries and resulted in more than 174.116 million infections, 3.75 million deaths, and 157.157 million positive cases fully recovered from this infectious disease, as of June 7, 2021. The emergence of a pandemic (COVID-19) has also hugely affected Pakistan's economy ( 11 – 14 ). Pakistan is the fifth most populous nation and recorded positive cases with the third highest positivity ratio in South Asia, and had the 26th highest deaths toll of 21,450 and 29th most COVID-19 positive cases with 933,750 worldwide, as of June 6, 2021. The first wave appeared at the end of May 2020, reported its peak in mid-June, and ended by mid-July 2020. Early November 2020 witnessed the second wave with low intensity, which reached its climax by mid-December. COVID-19's third wave severely affected the country during mid-March 2021. It exhibited its highest positivity rate, around 20%. New positive patients and death tolls commenced to skyrocket and reported a peak by April 15, 2022. Then the situation gradually improved with effective measures and restrictions. It caused enormous health, economic, environmental, and social problems. In Pakistan, health officials reported 564,824 confirmed infected cases, 12,380 indicating a 2.2% case fatality rate and total recoveries of 527,061, as of February 15, 2021 ( 15 ). The findings of a previous study reported that 33–42% of the admitted patients facing Middle Eastern respiratory syndrome (MERS) and SARS-CoV, known as severe acute respiratory syndrome, exhibited various health issues. The patients admitted to hospitals showed depressed mood, anxieties, stress, insomnia, mental distress, and impaired memory. Some recovered patients reported adverse effects of the disease after their recoveries. Consequently, virus infection caused various family issues and increased domestic violence and physical and mental health problems worldwide ( 16 ).

This virus' (COVID-19) symptoms vary; nevertheless they most commonly include fever ( 17 ), headache, cough ( 18 ) fatigue, breathing difficulties, a loss of taste, and a loss of sense of smell ( 19 – 22 ). The virus attack can appear from day one to fifteen or even longer after exposure to the infected person or environment. Research indicated that almost 35% of infected people do not show notable symptoms ( 22 – 25 ). People with noticeable disease symptoms are patients of coronavirus ( 26 , 27 ). Over 4/5 people (81%) develop noticeable mild-to-moderate health issues, such as pneumonia, and 14% of COVID-19 positive people report severe symptoms, including hypoxia and dyspnea. In addition, 5% of people develop acute symptoms of coronavirus, which results in shock, respiratory failure, or other health issues like multiorgan dysfunction ( 28 ). Studies reported that older people face a higher risk of virus attack and developing acute symptoms. Some patients have faced a series of health issues several months after a successful recovery from this (Covid-19) disease ( 29 ).

For the first time in 60 years, GDP has shown a negative growth, exacerbating the enormous financial crisis and recession. It has affected the quality of life of the public massively. Self-segregation, social alienation, and travel restrictions have forced the labor force to decline in all sectors of the economy, resulting in unemployment. The whole industry is facing a blockade, paralyzing most of the industrial sectors. In response to this COVID-19 outbreak, we summarize the impact of COVID-19 on all aspects of Pakistan's economy ( 30 ). Although in terms of mortality, COVID-19 does not have a similar pattern compared with the 2002–2003 severe acute respiratory syndrome (SARS), and its global spread is different from the Spanish Flu pandemic, which appeared in 1918–1919 ( 31 ).

The World Health Organization published survey results based on 130 countries in October 2020 to record the adverse influence of the virus (COVID-19) on various mental health issues. Almost 30% of countries encountered difficulties due to a lack of health workers to fight against the ongoing COVID-19 virus. Nearly 19% of member states of the WHO faced mental health issues. Of the member states, 28% had insufficient personal protective and preventive equipment. Conversely, 89% of the WHO member countries initiated protective measures and included psychological and mental support in the national preventive plans to combat the pandemic ( 32 ). The WHO report evidenced that monumental effects had monumental impact on global communities' mental health and universal well-being of societies. Visibly, due to insufficient capacity in responding to the COVID-19 outbreak, it is uncertain how this world will deal with the current looming disaster of mental health and global economic crisis. The COVID-19 disease quickly instigated substantial disruption to human societies, health care systems, and economies worldwide. The COVID-19 pandemic has caused global challenges and economic crises that are yet to unfold. This study examines the adverse impacts and strategic retorts on protective measures to combat the consequences of COVID-19 on social, environmental, economic, and health sectors worldwide. This article primarily aims to examine challenges, economic crises, and their effects on business activities, pressure on healthcare systems, and government support to revive society's normal state.

Figure 1 specifies the life cycle and transmission of the virus, which causes the infectious disease COVID-19 ( 33 ). The virus transmits through respiratory droplets of coronavirus patients to oral and respiratory mucous membranes cells. Moreover, coronavirus disease possesses the single-stranded RNA genome enfolded in (N) nucleocapsid protein (the capsid together with the nucleic acids of a virus) and three main protein surfaces. These are enveloped (E), membrane (M), and Spike, which replicate and reach the lower airways and potentially cause severe pneumonia ( 33 ). Figure 1 shows the life cycle of the transmissible virus with its potential immune reactions.

Figure 1 . It shows SARS-CoV-2's spread and life-cycle, causing the contagious coronavirus disease. Source: the WHO data related to the COVID-19 pandemic.

The Health Ministry reported a 95.3% recovery rate based on 302,708 cases in Pakistan, with 317,595 total confirmed cases and 6,552 deaths with 2.12% fatality, which is much lower than the global average rate (3.6%). The COVID-19 virus has caused over 36.84 million positive patients and 1,067,560 deaths. There are over 27.70 million patients who had fully recovered from this infectious virus by October 10, 2020 worldwide ( 34 ). Table 1 shows the top 10 countries based on recovery, as of November 05, 2020.

Table 1 . Global total cases, recoveries.

In the current situation, the incubation period of the COVID-19 is prevailing. However, the spread has reached almost every country worldwide. Health professionals have recommended self-isolation and social distancing by restricting social gatherings in cities and remote areas to stop the rapid spread. Smart lockdown measures are helpful to minimize the risk of large-scale infection spread of COVID-19. Avoiding social distancing would overwhelm the healthcare systems, causing massive scale causalities of human lives. However, blockades often choke economic development in numerous ways ( 35 ). The lockdown strategy helps control the rapid spread of the COVID-19 infection; however, it leads to adverse financial, health, and social factors. The COVID-19 pandemic has created the worst blockade, which has resulted in job losses of 5 million in Pakistan. The crisis of coronavirus (COVID-19) has taken a more massive toll on job losses than previously feared. The jobs and income losses have led to more hunger and had adverse effects on individuals' quality of life. The pandemic has developed to be a severe threat. Table 2 provides detail.

Table 2 . COVID-19: case mortality analysis worldwide (February 20, 2021).

Table 2 displays COVID-19 positive cases in countries with higher numbers of patients worldwide. Figure 2 specifies that the US is the most affected country with 25.5% of global cases in terms of confirmed COVID-19 patients (5,566,632), followed by Brazil 15.31% (3,340,197), India 12.14% (2,651,290), and Russia 4.25% (927,745). South Africa has 2.69% (587,345), Peru 2.45% (535,946), and Mexico 2.39% (522,162), Colombia showed 2.14% (468,332), Chile 1.77% (385,946), Spain 1.64% (358,843), Iran 1.57% (343,203), and the United Kingdom 1.46% (318,484). Table 3 shows countries reporting the highest death toll worldwide, as of February 20, 2021.

Figure 2 . COVID-19: analysis by countries with highest global cases (August 16, 2020). Source: data provided by World Health Organization related to coronavirus (COVID-19).

Table 3 . COVID-19: case mortality analysis - deaths worldwide (February 19, 2021).

Table 3 presents the countries reporting the highest deaths caused by the COVID-19 pandemic worldwide. The US has the highest number of COVID-19 confirmed cases (27,896,042) and deaths (493,082) with a case-fatality ratio of 1.8%. Brazil is the second highest state with established patients of COVID-19 (10,030,626), deaths (243,457), and case-fatality rate (2.4%). Mexico is the third most affected country from the COVID-19 pandemic with high confirmed infected cases (2,022,662), deaths (178,108), and case-fatality ratio (8.8%).

Figure 3 exhibits global CFR (Case-fatality-ratio) of the COVID-19 pandemic. China reported a 4.8% case fatality ratio, Italy 3.4%, Australia 3.1%, the United Kingdom 2.9%, Germany 2.8%, and Africa 2.6%. Similarly, South America reported 2.6%, Brazil 2.4%, Europe 2.4%, North America 2.2%, the world 2.2%, Pakistan 2.2%, the US reported 1.8%, and Asia recorded 1.7% CFR ratio for the COVID-19 virus.

Figure 3 . COVID-19 Case-fatality-rate (CFR) worldwide - February 15, 2021.

Figure 4 indicates the overall scenario of the COVID-19 pandemic in Pakistan. Figure 4 shows the COVID-19 overview with daily new tests and new cases' distribution in Pakistan. The lockdown strategy helps control the rapid spread of the COVID-19 infection; however, it leads to adverse financial, health, and social factors. COVID-19 has created the worst blockade, which has resulted in job losses of 5 million in Pakistan. The crisis of coronavirus (COVID-19) has taken a more massive toll on job losses than previously feared. The jobs and income losses have led to more hunger and left adverse effects on individuals' quality of life. The pandemic has developed to be a severe threat to the lower-income groups of society ( 36 ). It is vital to initiate measures to control the spread of the epidemic without destroying economic growth. The financial experts advised to eliminate adverse elements of the COVID-19 on the economy and take measures to revive the industrial process through a smart lockdown strategy ( 37 ).

Figure 4 . COVID-19 across Pakistan - February 12, 2021. Source: Ministry of Health, Pakistan.

The Nexus Between COVID-19 Arrival, Unemployment, and Decline in Economy

The economic experts estimated that Pakistan's economy might shrink by 15 billion US dollars in response to the adverse consequences of the COVID-19 pandemic. According to experts' prediction, the 4th quarter can show a 10% decline in Pakistan's GDP growth in the fiscal year of 2020. The government imposed full and smart lockdowns from March to June 2020, which resulted in no actual development of gross domestic product, and it reflected a negative (−2.0% GPD) growth in 2020, which would carry on to the first quarter of 2021. According to the Gallup Pakistan survey's findings, the unemployment rate might surge to a whopping 28%. There would be 6.65 million unemployed people during the fiscal year 2020–21, compared to 5.8 million in the preceeding year of 2020. Experts estimated that there would be a 30% to 40% layoff because of prolonged full or partial lockdowns, which has resulted in losses of 190 billion in the private sector ( 38 ). Before the arrival of the COVID-19 pandemic, the interest rate was over 13%. The State Bank of Pakistan dropped the interest rate to 7% on bank deposits in Mid-June 2020 to empower the business industry. However, a lower rate of return on investments in financial institutions has affected ordinary people as they were running their home expenses on the income of their deposits. The lower profit rate on deposits has caused mental stress for people who relied on their financial investments. Price-hike has increased, which resulted in lower spending power. Table 4 presents GDP, per capita income, and annual percentage change in growth.

Table 4 . GDP, Per capita income, and annual %-change in growth.

Economic Relief Package for Improving Quality of Life

The prime minister emphasized improving the quality of life of the public and approved an economic relief package of Rs. 2.1 trillion on March 14, 2020. The Government allocated one hundred fifty billion (Rs.150) for lower-income individuals, mainly laborer classes, and allotted PKR 280 billion (1.76 billion USD) for wheat procurement ( 27 ). The government ordered to defer interest payments of loans temporarily to support exporters and released Rs. 100-billion for subsidiaries to the agriculture sector along with small industries. The relief package offered a significant reduction in the prices of petroleum, electricity, and gas bills and postponed payments to pay later in installments, which helped to improve the quality of life of the public ( 39 ). Under this relief package, the government increased 50% of the Benazir Income Support Programme (BISP) to enhance the quality of life of the lower-income groups. Besides, 5.2 million beneficiaries through the BISP's ongoing National Socio-Economic Registry (NSER) and officials included more people in the package ( 40 ).

The Government also included health professionals in this relief support, as officials stated that doctors or paramedical staff die while treating the patients of COVID-19. The state would regard health professionals as martyrs, and their families would receive the same packages of the martyrs. The federal cabinet members reviewed and approved the economic package on March 13, 2020, to make a better quality of life for ordinary people ( 25 ). The Government established the Economic Coordination Committee to approve the relief package and granted supplementary Emergency Relief Fund of Rs. 100-billion to support 12 million low-income families in combating the COVID-19 pandemic. The Government provided cash assistance for 4 months to deserving families as a one-time dispensation after biometric verification and approval of the district administration under the Ehsaas Program. The Government had disbursed Rs. 22.466-billion among 1.77 million people as of April 15, 2020 ( 41 ).

China reported this contagious disease (COVID-19) for the first time in Wuhan, which infected people severely; however, the Government effectively controlled the illness within 5 months. Other successful countries, such as Singapore, South Korea, Pakistan, Australia, and New Zealand, also managed the rapid spread of this disease, and the trend of new cases has declined sharply. COVID-19 hit the United States, Spain, Italy, Spain, and France extremely hard at the start and put a heavy burden on their healthcare systems. It has developed to be a global health emergency more disastrous than the Second World War ( 37 ). As the developed countries around the world bear the brunt, the disease has also hit developing and emerging countries massively. Pakistan is on the brink of extinction, with tight ropes in the face of economic weakness. Next year is likely to be the most severe challenge Pakistan will encounter, which requires resilience, competence, and discipline. If the country fails, the other end of the equation is worse than our darkest nightmare ( 31 ). By 2019's second half, the world economy entered into a turbulent and challenging recession scenario. However, financial experts hoped economic conditions would improve in 2020 as large emerging economies came forward to lead the global economy back to potential economic growth by 2021. With the devastating effects of the COVID-19 eruption, all bets disappeared and revised all global growth forecasts as this pandemic has changed those growths downwards.

The COVID-19 Pandemic's Adverse Impacts on Global Economies

The emergence of COVID-19 has negatively affected the global economy's economic growth beyond anything experienced within the past 100 years. The economic experts estimated that the COVID-19 pandemic could trim 3.0–6.0% off global economic growth by the end of 2020 ( 42 ). The experts expect a partial recovery of the global economy in 2021, assuming that there is no second wave of the spread of the pandemic. The spread of the infection has slowed down economies, and as a result, Pakistan is facing an economic, social, and health crisis and trying to revive its economic growth to improve individuals' quality of life. The adverse effects are severe, and GDP has shown negative growth for the first time in the last 60 years. The result is worsening in the current and financial balance, supply chains disruptions, and growing unemployment with job losses of 5 million. In January 2020, WHO professed the spread of the coronavirus as a world health emergency. Since then, the arrival of the pandemic (COVID-19) emergency has led to a global economic, social, and public health crisis, resulting in the loss of 90 trillion USD to global economies. Globally, governments have initiated steps to balance often-competing economic policy objectives to address the social and public health crisis with economic considerations to revive economic growth to stabilize their economies.

The COVID-19 Pandemic Influence on Gross Domestic Product (GDP of Pakistan)

The fragile economy of Pakistan was already struggling to move toward a stable stage when the pandemic struck. The COVID-19 epidemic struck the economy massively. The financial experts estimated that economic fallout caused by COVID-19 would considerably derail the recovery process of the economy in Pakistan, which has already taken a devastating blow on economic growth ( 27 ). The pandemic has struck all the sectors, and the Pakistani economy has shrunken with raised unemployment due to the loss of 12.3 million jobs ( 11 , 12 ). The growth of GDP was 5.8% in 2018, now GDP is 0.98%, and it is indicating a further decline for the coming years. The country's fiscal deficit is roughly 10.0%, and revenues of Pakistan have plummeted during the past 2 years. These indicators have specified that the appearance of the COVID-19 pandemic will seriously negatively affect the country ( 43 ).

COVID-19 and Burden on Public Health System

The advent of the COVID-19 epidemic affected individuals' lifestyles around the world. Health education and counseling model is helpful to reduce mental stress and hypertensive disease in crisis situations ( 44 ). The outbreak has extensively changed healthcare demands and ways medical services are deliver to people, especially in Southeast Asia and Pakistan ( 45 ). The region has introduced digitalization in the health care systems. The outbreak of COVID-19 has shifted care from face-to-face physician's consultation to remote consultations through phone and online mediums. The coronavirus pandemic has caused immense challenges to the health care systems, people's lives, and the global economy ( 25 ). With the COVID-19 epidemic on the rise, society started to pay more attention to pharmaceutical industries and healthcare systems to provide better medical services, which had both negative and positive impacts across various sub-sectors. In the short-term, the pandemic caused a variety of consequences on the pharmaceutical industry, healthcare institutions, distribution and retail channels of pharmaceutical companies, and health insurance companies worldwide. Concerning the medium-term and long-term impacts, the COVID-19 pandemic effects on pharmaceutical companies and healthcare would be relatively positive ( 46 ). The healthcare system was already overstretched before the onset of the outbreak of the COVID-19 epidemic. The Pakistani health care system statistics specified that one doctor is available to treat 963 individuals, and there is one bed for 1,608 people, according to UNDP statistics. Pakistan received a bailout package of six billion US dollars from the IMF to tackle the monetary crisis. The Pakistani economy was progressing toward a stable phase to recover from the economic crisis when COVID-19 struck ( 47 ). The pandemic hit caused 12.50 million people to suffer from food security. One-third (35%) of the population was living below the poverty line before the epidemic, and now it is over 50% ( 48 ). At present, 66% of the population (150 million) are facing poverty, and they need immediate economic relief to improve their quality of life ( Table 5 ).

Table 5 . COVID-19 cases in selected Asian countries with patients victim by the virus.

Economic Indicators Under COVID-19 Pandemic

Risk analyst expert estimated that Pakistan's economy would shrink by 15 billion US dollars because of the COVID-19 pandemic. According to his prediction, the fourth quarter would indicate a 10% decline in Pakistan's GDP during the fiscal year of 2020. Complete or smart lockdowns would result in no actual growth of gross domestic product, or a negative −2.0% GPD growth in 2020, leading to the first quarter of 2021. Gallup Pakistan conducted research and reported that the unemployment rate would surge to a whopping 28%. During the fiscal year 2020–21, estimations indicated that unemployment would increase to 6.65 million, compared to 5.8 million in the preceding year of 2020. Experts also projected a 30–40% layoff in the formal sector because of prolonged complete or partial lockdowns, resulting in an impact of 190 billion in the private sector ( 38 ). Before the outbreak of COVID-19, the interest rate was over 13%, and the State Bank of Pakistan cut interest rates to ease borrowers by decreasing 225 basis points (7%) in Mid-June 2020, to empower the business industry. The experts indicated that Pakistan would need financial assistance from the IMF, the World Bank, or its strategic allies, such as China or other countries. Because of limited financial capacity to beat COVID-19, Pakistan would need more assistance to combat the adverse effects of the pandemic. According to the 2019 estimation, the total GDP of Pakistan was $284 billion (nominal), with 3.30% economic growth. However, it showed a negative growth rate of −2.60% after the pandemic. The COVID-19 epidemic caused a 10% decline to GDP with an estimated loss of Rs. 1.10 trillion in 2020. If exports fell by 20%, the Pakistan economy might face a 4.64% decline ( 49 ).

The Asian Development Bank stated that the global health emergency had declined growth to 2.20 in Asia, and it would rebound to 6.20 in the fiscal year 2021. In this challenging situation, innovation is crucial to gain inclusive, environmentally sustainable economic growth. Some developing economies in Asia are close to the global innovation frontier, while other countries lag behind. The Asian Development Bank approved a loan of 300 million US dollars to strengthen Pakistan's public health sector to combat the effects of the COVID-19 pandemic. It helped to meet the basic needs of the poor and vulnerable segments of society. ADB initiated the CARES program to help the Pakistan Government deliver social protection programs to vulnerable and lower-income groups of poor segments and expanded the health sector's capabilities. It provided a pro-poor fiscal inducement to boost economic growth and offered jobs to fight the adverse economic effects of COVID-19. AIIB facilitated parallel finance of 500 million US dollars to the CARES program, and it received another 500 million US dollars from the World Bank to support Pakistan. These measures helped Pakistan to improve the quality of life for the lower-income segments ( 38 ).

The COVID-19 Appearance and Pakistan's Imports

Pakistan's total imports as of March 2020 were Rs. Five hundred twenty-five (Rs. 525) billion rupees, with a downtrend of −18.7% year-on-year, claimed by Pakistan Bureau of Statistics (PBS). According to the National Bank of Pakistan (SBP), the largest import partners were China, the United Arab Emirates, Singapore, the United States, and Saudi Arabia, accounting for 51% of total imports between July 2019 and February 2020. During that period, China alone contributed 21% to total imports ( 50 , 51 ). Hence, imports decay indicates the effects of a series of factors, including supply chain disruptions, falling demand in Pakistan, and lower commodity and commodity prices ( 52 ). The fall in imports indicated a positive move toward Pakistan's current account deficit. PIDC2 described that Pakistan's 32% of imports determine final products that do not directly influence Pakistan's GDP. Further, raw materials commodities account for 68% of Pakistan's imports, such as intermediate and capital goods that refer to essential goods and raw materials to produce end commodities for domestic consumption and export. As a result, these declines will have a negative impact on investment spending and exports. Because of this, Pakistan may experience a knock-on effect of a decrease in imports, which will affect GDP. Hence, the decline in imports would lead to a negative impact on investment spending as well as exports. Pakistan could experience a chain reaction of falling import volume, which will negatively affect the country's gross domestic production (GDP). The import volume during 2020 was PKR six hundred fourteen thousand nine hundred thirty-four (614,934) million in July 2020, Rs. 611,449 million in June. It remained at Rs. 589,739 million in July 2019, which showed an increase of 0.57% increase in June 2020 and 4.27% in July 2019. The Balance of Trade always remains negative, and the average was Pak Rs. −46,486.18 Million from 1957 to till 2020, which means Pakistani spends more on imported items and earns less from exported commodities. It affects spending on public health to improve the quality of life ( 53 , 54 ).

The COVID-19 Outbreak and Exports Hurdles

Pakistan's total exports in March 2020 amounted to PKR 287.70 billion indicating a downward trend of 12.9% from the previous month, according to the Pakistan Bureau of Statistics (PBS). The most prominent export partners of Pakistan are the United States, the United Kingdom, China, Germany, and the Netherlands, which account for about 40% of the total exports, according to the central bank, State Bank of Pakistan (SBP). The outbreak of COVID-19 massively affected all the partner countries, which has adversely affected global trade. Worldwide, business and trade are showing a declining trend, and it will lead to a decrease in global trade activities as the trade demand has decreased since the coronavirus pandemic. Almost every country restricted social set ups and gatherings and imposed complete or a partial/smart lockdown, and closed public transportation in most situations. It has had an extreme effect on industry, and it disrupted the process of commodities' production ( 53 , 54 ). According to the Pakistan commerce ministry's estimation, exports fall could reach 20% with the strike of the COVID-19 pandemic, and it could lead to a loss of 4 billion US dollars by June 2020 ( 52 ). In the post-COVID-19 world order scenario, Pakistan can take advantage of two emerging potential opportunities to reform its economy. The major competitors' economies of India and Bangladesh are squeezing drastically, and import commodities have become cheaper for the time being. Pakistan expects a roughly 20% fall in exports and remittances, and smart economic strategies can help to take commercial benefits by designing global supply chains. Pakistan can also exploit the tense trade situation between China and the United States and tailor strategies to attract foreign investors. The recession and economic crisis worldwide offers economic opportunities for Pakistan due to its important geopolitical location in the region. Pakistan can take up global orders to increase the export volume. It would help Pakistan to spend more on public health systems to improve the quality of life of the people.

Remittances

Remittances from Pakistan were $1.824 billion in February 2020, which indicated a decreasing trend (−4.4%) from the previous month, according to the announcement of State Bank of Pakistan (SBP). The reason for the decline was the spread of the COVID-19 pandemic around the world. The remittances maintained a downward trend in May 2020. Overseas Pakistanis typically send remittances to Pakistan from oil export Gulf Cooperation Council countries. The largest share of remittances in February 2020 came from Saudi Arabia ($422 million), the United Arab Emirates ($387.1 million), and the United States ($333.5 million). According to the World Bank, remittances from 66 countries, particularly emerging and developing countries, accounted for more than 5% of GDP in 2019. In the case of Pakistan, remittances accounted for 7.7% of GDP in the same year. Pakistan received the highest ever remittances worth $2.768 billion with an increase of 12% for a single month in July 2020, as compared with June 2020. The statistics indicated a rise of 36.5% in remittances from July 2019. Analysts' reasons for rising remittances are primarily fewer pilgrims journeying to religious places. Overseas Pakistanis religious workers had higher savings, and travel restrictions and flight cancelation contributed to a rise in remittances. The Government facilitates overseas workers by improving channel efficiency and introduced incentives on foreign money transfers.

The World Bank emphasized that the outbreak of COVID-19 could severely affect remittances due to the closure of major countries. Financial experts have indicated a fall in remittances to Pakistan from major countries, like Saudi Arabia, UAE, and the United States. It is due to lockdown and blockade in these countries ( 49 ). From mid-June to August 2020, oversees Pakistanis contributed a lot to the Government's appeal by sending remittances with banking channels. It was the result of Pakistani schemes to attract overseas Pakistanis, which showed a tremendous positive impact on generating remittances inflows to Pakistan. The State Bank of Pakistan reported that overseas Pakistanis' remittances drastically increased to 50.7%, which reached sn all times best, worth 2.466 billion US dollars, as of June 30, closing the fiscal year 2020, with a closing total of 23.1 billion dollars compared with 1.636 billion US dollars in 2019. The remittances inflows to Pakistan remained steady and stable despite the hit of the COVID-19 epidemic that disrupted the global economy and caused unemployment and a substantial fall in remittances of the workers worldwide. The remittances inflows from July to December 2020 to May 2021 remained over 2 billion dollars with a consecutive 8-month increase in the remittances. Remittance inflow was reported at 2.27 billion in January 2021, which was 19% higher than January 2019 and 24% more than the last fiscal year. Pakistan can utilize these all-time high remittances to revive the economy and spending on public health to improve life quality ( 55 ).

Linkage of Poverty and Unemployment on Life Quality

Pakistan's total workforce is 63.4 million, of which 26.41 million (41.6%) stands vulnerable, according to the Employment Trends reported by the Pakistan Bureau of Statistics in 2018. Vulnerable employment mentions a proportion of self-employed and workers employed domestically in total employment, including the poor class workers relying on daily wages. These workers are likely to be the most affected. They may lose their jobs because of the COVID-19 pandemic in Pakistan ( 56 ). The experts have warned of a significant increase in the number of poor and unemployed workers in the coming months in response to complete or partial lockdowns imposed by the Government to control the spread of the pandemic. It has slowed down economic activities, which leads to a high proportion of vulnerable employment in the country. PIDE released a report stating that the Government's modest restrictions could result in unemployment of 12.3 million workers, which represents 46.3% of the entire number of vulnerable employment and 19.4% of the whole employment number in Pakistan ( 57 ). According to the experts' estimation, the number of layoffs/job cuts in the retail and wholesale sectors would reach 4.55 million. As a result, Pakistan's poverty rate could rise from 23.40 to 44.20%, which will negatively impact individuals' quality of life ( 58 ).

COVID-19 and Trade Disruptions

The emergence of a global health emergency caused by the hit of the COVID-19 epidemic challenged global trade. Globally, enterprises encountered numerous problems with certain levels of economic losses, such as fall in demand, raw materials shortage, and disruptions in trade, transportation, supply chains, and export commodities orders cancelations. The outbreak of COVID-19 massively affected micro as well as small and medium enterprises worldwide. These firms are the backbone and engine of global economies, which generate employment opportunities on a large scale. The Pakistani SMEs' contribution is substantial. They add 40% to national GDP, and 90% of the registered 3.2 million enterprises are SMEs and contribute over 40% of total exports ( 11 , 12 , 59 ). At the domestic level, social distancing measures, mainly the blockade, have caused inconvenience and shortages of supply. Besides, import restrictions and delays/cancellations of export orders have led to a decline in global trade, which has significantly slowed the pace of economic and trade activities. Even if defensive measures have contained the spread of coronavirus, the internal economic functions of the economy are facing disruptions; however, the COVID-19 pandemic has struck countries that are part of the global value chain (VGC) ( 35 , 60 ). Pakistan imposed social gathering restrictions and ordered to close educational intuitions to minimize the rapid spread of the coronavirus disease through complete and smart lockdowns at various stages, which caused disruptions in economic and trade activities. The five main trading partners of Pakistan who account for 50% of the trade share are China, the United States, the United Kingdom, Japan, and Germany. Four of these partners are also the countries hardest hit by COVID-19. The pandemic of coronavirus has severely affected the international trade flows of these countries, and export volume from China and Japan fell over 15%. The other three countries' exports slowed down by 5% ( 61 – 63 ).

The COVID-19 Pandemic Influences on Economy's Critical Sectors

The ongoing spread of the coronavirus pandemic affects the global economy. As a result, this epidemic (COVID-19) also hit all sectors of Pakistan economies, which disrupted trade and economic activities in the country. The crisis has affected the real estate market and property valuation and changed customer satisfaction in many industries ( 64 – 66 ). The pandemic is still spreading worldwide, and Pakistan's business community has begun to look for alternative options to purchase raw materials to produce goods. Spectrum Securities Limited released a report and warned that if the pandemic continues to spread for the next few months, it will adversely affect various sectors of the economy ( 67 – 70 ). The report stated that there is a prolonged interruption in the supply chains to receive raw materials. China has restricted transportation and other business activities to mitigate the virus infection. Accordingly, the industrial sector is facing a significant shortage of raw material supplies as they import these items from China. It has slowed down manufacturing activities, and further delays might have disrupted producing goods. This panic situation has caused more inflation and left adverse effects on critical accounts of the economic sectors. However, Pakistan reported an 11.4% upsurge in large-scale manufacturing by December 2020 over the previous year ( 36 ).

Impact of COVID-19 Outbreak on the Steel Industry

The competition in the steel industry is very high, and producers tried to meet the global demand of 1,869.9 million tons of crude steel with a rising demand of 5.7%, with 1,341.6 Million tons production in and 3.4% more produced worldwide in 2019. China is the leading global exporter of steel with the highest output in the world. Pakistan imported steel products amounting to 1,390,561 million US dollars, which was 3% of the total steel exports in China in 2019. At the advent of the coronavirus (COVID-19), China's steel industry faced great difficulties due to lockdown and closure of the industry ( 71 ). In China and the rest of the world, the long-term effects of the coronavirus pandemic (COVID-19) are still pending. The experts have predicted that this outbreak has adversely struck the global steel industry, at least in the short to medium term. China is the largest producer of steel and its alloys, and it has restricted supplies and transportation. At the same time, India is focusing on increasing its share of steel products and raw materials goods in the global steel market ( 63 , 72 ).

On the other hand, Pakistan's steel industry significantly relies on raw materials imported from China. Japan and the local industry are under pressure to produce goods because of this blockade from China. The effects of the infection of COVID-19 are still ongoing, and the business community is looking for alternatives at a reasonable cost to produce products to supply orders to carry on manufacturing and construction activities in the country. India is the second-largest steel producer after China, with an annual output of more than 106 million tons. Pakistan has the opportunity to buy raw materials for steel production from India. Over the past few years, excessive tensions between India and Pakistan have limited imports of various industrial raw materials, such as certain raw materials to produce pharmaceutical products. Pharmaceutical firms in Pakistan need to import raw materials to produce medicines to combat COVID-19 and provide relief to the public to improve the quality of life ( 73 ).

Linkage Between COVID-19 and Decline in Tourism and Travel Industry

The advent of the infectious disease COVID-19 has hugely affected the tourism industry by bringing the world to a standstill position. Against a background of heightened uncertainty, reliable and up-to-date information is more imperative than ever before both for the tourism industry and tourists ( 74 ). The outbreak of COVID-19 has had a significant effect on tourism due to travel restrictions with a slump in travel demand among tourists worldwide. Several countries and regions have posed travel restrictions and entry bans to contain the spread of COVID-19 infection. The World Tourism Organization of UNO projected that international tourist arrivals would fall by 20–30% in 2020, which will lead to a potential economic loss of 30–50 billion US dollars. The global travelers' planned travel went down by 80–90% due to unilateral and conflicting travel restrictions that have taken place regionally due to the COVID-19 pandemic. The pandemic adversely affected tourist attractions, such as sports venues, amusement parks, museums, and entertainment worldwide. Many countries have restricted entries to main tourism destinations, airlines have restricted flight operations, organizers canceled business meetings and conferences, and hotels canceled room bookings. These measures against the spread of the pandemic have affected the tourism and hotel industry worldwide. Pakistan also posed restrictions on tourism and the hotel industry, and bookings have dropped drastically, which caused a significant loss to the hotel industry ( 75 ).

Many workers have lost their employment since March 2020. Numerous hotels received orders to cancel reservations as foreign travelers canceled travel plans, domestic tourists halted travel, and companies' business officials postponed travel activities. Pakistan Hotel Association stated that 200 registered business members with the hotel industry dropped their booking drastically with the advent of the pandemic in Pakistan. The hotel industry recorded a PKR 100 million loss in February 2020 due to a significant fall of guests. The emergence of the epidemic (COVID-19) has also affected the economy of Pakistan severely. There are 317,595 confirmed cases of coronavirus in Pakistan, as of October 9, 2020, and the pandemic has massively affected all sectors of the national economy. By January, the booking rate reached 95%, and it fell to 40% by the first week of March 2020 for the hotel industry ( 76 , 77 ). With the reduction of outbound tourism, the amount of inbound tourism in Pakistan has also remained significantly reduced. Besides, tourism trends in Pakistan have fallen by 60–70% due to concerns about the coronavirus. The number of travelers leaving Pakistan for overseas travel is minimal, mainly due to the European embargo and the United States travel instructions issued to travelers from different countries. However, summer vacations were once the peak season for tourism in Pakistan. However, most businesses will now cease to close after an early leave announcement in Sindh this year ( 78 ).

The Massive Impact of Coronavirus on Property Markets

The emergence of the COVID-19 pandemic has massively hit the real estate and energy sectors in unprecedented ways around the world ( 79 – 85 ). The unemployment rate in the United States remains sky high with the advent of the pandemic's lockdown and closure of business activities. The unemployment rate was 13.3% in May although down from 14.70% recorded in April 2020. If the pandemic prolongs, it will cause significant problems and possibly a knock-on effect. The capital value of the real estate's retail properties falls by 20–30%, according to Professor Nori Gerardo Lietz, a real estate investment teacher at Harvard Business School. The unlevered value of enterprises of the real estate assets had decreased by more than 25% in most sectors, particularly in the hotel and leisure sectors ( 86 ). The COVID-19 pandemic has hit the real estate sector in Italy, and estimation shown the fall in turnover between €9 and 22 billion compared with the first quarter of 2019. This result refers to the already rising demand for high-quality properties, which provide a safe, convenient, efficient, and healthy working and living environment. Concerning the real estate industry in Pakistan, it suffered a lot after a change in the government regime in 2018. The Government launched new policies and taxes, which greatly affected this industry and dampened consumers' confidence. The past 2 years immensely changed a large number of property dealers, builders, and investors because of unfavorable economic conditions. The real estate survives mainly on the significant investments by overseas Pakistanis; however, this test seems longer as the COVID-19 pandemic has hugely affected everyone and the real estate market in all major cities, including Lahore, Islamabad, Karachi, and Multan received a massive hit ( 87 , 88 ). Bahria Town Lahore and Karachi closed all public spaces and closed places in these societies, including the Eiffel Tower, Zoo, Gymnasiums, Parks, and Sports fields. It means that all real estate transactions will stop for an indefinite period until the situation improves. The situation is getting better, and the real estate industry is reviving to reasonable conditions gradually as the Government has recently lifted travel restrictions ( 65 ). However, fear still remains. As a precautionary measure, some major builders of societies, including Bahria Town Lahore, Islamabad and Karachi, and DHA projects, have closed offices and facilities to mitigate the spread of the pandemic ( 87 ).

The COVID-19 Adversity and Pharmaceutical Sector

Pakistan's pharmaceutical industry made good growth during recent decades ( 89 – 94 ). There are more than 800 large volume companies of pharmaceutical units, including 25 multinational operated pharma firms in the country ( 95 ). The pharma companies import raw materials from abroad to make medicines ( 91 ). The primary raw materials come from China, India, and Europe. The pandemic resulted in numerous health challenges ( 25 , 29 , 96 – 98 ). The Pakistan pharmaceutical industry is self-sufficient and meets more than 90% of the demand of the country. China is a significant producer of low-cost generic medicines and raw materials to make medicines ( 99 ). Most of the pharmaceutical companies entirely or partially rely on the pharmaceutical industry of China. Pakistan relies on China to supply active drug ingredients and other chemicals such as paracetamol, penicillin, analgesic ibuprofen, and popular diabetes drugs. However, pharma companies import some semi-APIs from India, Europe, and other countries. Imports from China account for 25% of Pakistan's total chemical and pharmaceutical raw materials to produce final drugs. While this critical figure could affect the country's drug production, it depends on the level of stock maintained by local pharmaceutical companies. Pakistan imports some portion of the medicines from overseas pharmaceutical companies. The advent of COVID-19 has massively affected the production of drugs worldwide. The outbreak of COVID-19 struck Pakistan and disrupted the supply chain of drugs. COVID-19 caused a shortage of raw materials and resulted in massive problems due to restrictions on transportation from China and other global suppliers ( 100 ). The crisis caused challenges for the people and affects life quality massively ( 43 ). Prices of medicines have risen, and it greatly affected the quality of life of the people ( 43 , 101 , 102 ). It was out of reach for people because of the economic crisis in Pakistan. Social support programs can secure workers health safety, which can increase employees' mental well-being ( 103 – 106 ).

Discussion and Conclusion

The Coronavirus pandemic (COVID-19) emerged as the worst health calamity of the world within the past century. Globally, human societies faced the most thought-provoking health disaster since the catastrophe of World War II. Wuhan city reported this new type of infectious respiratory disease at the end of December 2019. The pandemic spread rapidly worldwide, posing substantial economic, environmental, social, and health challenges and massively disrupting social, economic, and religious communication and interaction worldwide ( 107 ). Globally, many countries are working to reduce the rapid spread of this ongoing COVID-19 pandemic through experimental facilities, identifying suspected and infected patients, and restricting social gatherings by implementing lockdown strategies ( 108 ). This study focused on identifying the massive effects of the COVID-19 epidemic on various segments of human society. The advent of the COVID-19 pandemic has shaken political, environmental, economic, health, and social factors foundations around the world. The pandemic caused mental stress and individuals used social media platform to seek health-related information. Some people were addicted to Facebook ( 44 ). At present, the appearance of the COVID-19 outbreak has most severely affected developing countries, including Pakistan. The pandemic has posed challenges for prioritizing lifestyle based on health promotion to prioritize health needs for students ( 109 , 110 ). The healthcare systems, economic growth, resources, and governance problems have obstructed remedial action to revive the economy. This study aims to provide some limited prediction work on the economic impact of Covid-19 in the entire core economic field to illustrate the financial danger posed by the coronavirus pandemic to Pakistan. The ongoing spread of the coronavirus epidemic impacted economies. As a result, the (COVID-19) pandemic also hit the Pakistan economy's critical sectors and disrupted social interaction, trade, and economic activities. The government of Pakistan approved economic relief packages to uplift the lower-income segments of Pakistani society and provided financial support to improve their quality of life.

The pandemic spread has massively affected significant factors of the economy, such as imports, exports, remittance, public health, tourism, steel, agriculture, real estate, and pharmaceutical sectors. The adverse effects of the pandemic are still spreading, and business communities are searching for alternative ways to import raw materials for goods productions. Pakistani business firms mostly import raw materials from China, India, and other countries; however, China and other suppliers have posed restrictions on transportation and business activities to suppress the infection of COVID-19. The industrial sector has encountered a great challenge of raw material supply from China, which delayed the manufacturing process of commodities. The ongoing spread of COVID-19 caused a price hike and higher inflation and affected quality of life. The prices of medicines have risen, and it greatly affected the quality of life of the people. Medicine was out of reach for people because of the economic crisis in Pakistan. The arrival of the COVID-19 pandemic struck the tourism industry adversely and brought the world to a standstill position. Pakistan has reported an almost 11.4% increase in large-scale manufacturing by December 2020 over the previous year. Against a backdrop of heightened uncertainty and a dreaded situation of the coronavirus pandemic, reliable and up-to-date news is imperative for the tourism industry and tourists. Travel restrictions caused by the epidemic have adversely affected tourism and hotel industries with a slump in travel demand around the world. Numerous countries imposed travel restrictions as well as entry bans to control and mitigate infection of the coronavirus. With the blockade of economic activities, the pandemic spread has dramatically affected the quality of life of ordinary people worldwide. Evidently, due to insufficient resources to manage the adverse effects of the COVID-19 pandemic, it is uncertain how the health professionals and world leaders will deal with the present looming global mental health challenges and the COVID-19's spillover impacts on the economic crisis worldwide.

This study results provide a detailed analysis of the critical factors of the economy and health issues with global perspective implications. This article primarily focused on exploring economic consequences on the global economies and discussed Pakistan as a case study. The study contributes to the literature on the COVID-19 crisis. It examined the implications of the pandemic on financial and global health issues by examining America, Asia, Europe, Africa, Australia, and the Middle East. This study reports some limitations as it discussed health challenges and some critical economic factors that caused significant disruptions' with the downward trend of the economic growth. Forthcoming studies can explore other elements due to COVID-19 that posed damage to the economy and mental well-being. Future researches can investigate global health emergencies and disruptions in the mechanism of supply and demand. The effect that the pandemic has had on travel, service, tourism, food, and energy consumption demands can contribute interesting results. The pandemic's upcoming studies can explore the COVID-19 outbreak's socio-economic effects, available treatments, vaccination facilities, and reducing mental health stress to fight against this ongoing infectious disease. The study proposes non-pharmaceutical interventions to formulate smart lockdown strategies to restart economic activities. Work from home, online business, home delivery services, digital currency use, and Government support for health and business support will help progress toward the next normal in society.

Data Availability Statement

The original contributions presented in the study are included in the article/supplementary material, further inquiries can be directed to the corresponding author/s.

Author Contributions

JA conceptualized the idea, contributed to study design, completed the entire article, including introduction, literature, discussion, conclusion, and edited the original manuscript before submission. CW and KD contributed to edited the revised manuscript and contributed to the literature, discussion, and conclusion. DW the study design, analysis, reviewed and approved the final edited version, and supervised this research paper. RM approved the final edited version and contributed to the literature, discussion, and conclusion. All authors contributed to the article and approved the submitted version.

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher's Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

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Keywords: COVID-19, public health, economic crisis, smart lockdown strategy, social factors, spillover impacts

Citation: Wang C, Wang D, Abbas J, Duan K and Mubeen R (2021) Global Financial Crisis, Smart Lockdown Strategies, and the COVID-19 Spillover Impacts: A Global Perspective Implications From Southeast Asia. Front. Psychiatry 12:643783. doi: 10.3389/fpsyt.2021.643783

Received: 18 December 2020; Accepted: 09 June 2021; Published: 03 September 2021.

Reviewed by:

Copyright © 2021 Wang, Wang, Abbas, Duan and Mubeen. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) . The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Dake Wang, dakewang@sjtu.edu.cn ; Jaffar Abbas, dr.j.abbas@outlook.com ; orcid.org/0000-0002-8830-1435

Disclaimer: All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article or claim that may be made by its manufacturer is not guaranteed or endorsed by the publisher.

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Financial stress and depression in adults: A systematic review

Naijie guan.

1 Institute of Applied Health Research, College of Medical and Dental Sciences, University of Birmingham, Edgbaston, Birmingham, United Kingdom

Alessandra Guariglia

2 Department of Economics, University of Birmingham, Edgbaston, Birmingham, United Kingdom

Patrick Moore

Fangzhou xu, hareth al-janabi, associated data.

All relevant data are within the paper and its Supporting Information files.

Financial stress has been proposed as an economic determinant of depression. However, there is little systematic analysis of different dimensions of financial stress and their association with depression. This paper reports a systematic review of 40 observational studies quantifying the relationship between various measures of financial stress and depression outcomes in adults. Most of the reviewed studies show that financial stress is positively associated with depression. A positive association between financial stress and depression is found in both high-income and low-and middle-income countries, but is generally stronger among populations with low income or wealth. In addition to the “social causation” pathway, other pathways such as “psychological stress” and “social selection” can also explain the effects of financial stress on depression. More longitudinal research would be useful to investigate the causal relationship and mechanisms linking different dimensions of financial stress and depression. Furthermore, exploration of effects in subgroups could help target interventions to break the cycle of financial stress and depression.

Introduction

Depression is one of the most common mental health problems and is marked by sadness, loss of interest or pleasure, feelings of guilt or low self-worth, disturbed sleep or appetite, feelings of tiredness, and poor concentration [ 1 ]. Depression is a leading cause of disability and poor health worldwide [ 1 ] and is expected to rank first worldwide by 2030 [ 2 ]. According to a survey from the World Health Organization, more than 322 million people, which accounted for approximately 4.4% of the world population, suffered from depressive disorders in 2015 [ 3 ]. The lifetime risk of developing depression was estimated to be 15%-18% [ 4 ]. Mental health problems including depression have imposed a heavy economic burden on individuals and households who are suffering from mental disorders and even on society [ 5 – 7 ]. Specifically, the global costs of mental health problems are increasing each year in every country. Those costs are estimated to reach approximately 16 trillion dollars by 2030 [ 8 , 9 ]. There is a considerable need to explore the risk factors of mental disorders or the determinants of mental health, which will inform preventive strategies and actions aimed at reducing the risk of getting mental disorders and thereby promoting public mental health.

Many social and economic determinants of depression have been identified. These include proximal factors like unemployment, low socioeconomic status, low education, low income and not being in a relationship and distal factors such as income inequality, structural characteristics of the neighbourhood and so on [ 10 – 12 ]. Research has emerged in the past two decades focusing on the association between the individual or household financial stressors and common mental disorders such as depression and anxiety. However, findings regarding the relationship between different indicators of financial stress and depression are inconclusive in the previous literature. Studies have shown positive associations between depression and various indicators of financial stress such as debt or debt stress, financial hardship, or difficulties [ 13 – 15 ]. Some other studies find no relationships when financial stress was indicated by low income. For example, Zimmerman and Katon [ 16 ] found that when other socioeconomic confounders were considered, no relationship between low income and depression was observed. Besides, there is evidence showing a negative association between low income and major depressive disorder in South Korea [ 17 ]. A 2010 review on poverty and mental disorders also finds that the association between income and mental disorders (including depression) was still unclear [ 18 ].

The social causation theory is one of the theories that has been proposed to explain possible mechanisms underlying the effect of poverty on mental disorders [ 18 , 19 ]. It states that stressful financial circumstances might lead to the occurrence of new depressive symptoms or maintain previous depression. This might be due to exposure to worse living conditions, malnutrition, unhealthy lifestyle, lower social capital, social isolation, or decreased coping ability with negative life events. Individuals or households with limited financial resources are more vulnerable to stressful life events (e.g., economic crises, public-health crises), which might increase the risk of mental health problems [ 18 – 20 ]. However, practically, social causation might not be applicable to situations where individuals are not in poverty or deprivation but still can experience depression due to financial stress.

Reviews to date have examined the relationship between debt specifically and broader mental health outcomes with depression being one of them. For example, two reviews published in 2013 and 2014 reviewed the literature on the relationship between debt and both mental health and physical health [ 21 , 22 ]. They concluded that there was a significant relationship between personal unsecured debt or unpaid debt obligations and the increased risk of common mental disorders, suicidal ideation and so on [ 21 , 22 ]. In terms of depression, they found that there was a strong and consistent positive relationship between debt and depression. Another focus of the literature is on the relationship between poverty and mental health problems including depression in low-and middle-income countries (LMIC). In those reviews, indicators of poverty include low socioeconomic status, low income, unemployment, low levels of education, food insecurity and low social class [ 18 , 23 ]. Both reviews find a positive relationship between poverty and common mental disorders, which exists in many LMIC societies regardless of their levels of development. Being related to low income, factors such as insecurity, low levels of education, unemployment, and poor housing were found to be strongly associated with mental disorders, while the association between income and mental disorders was unclear.

The reviews discussed above focus mainly on the relationship between debt or poverty and mental health outcomes. As sources of financial stress are complex and multidimensional, indicators such as low income or debt are not the only economic risk factor of mental health problems. Other sources of financial stress such as lack of assets, economic hardship or financial difficulties (e.g., whether an individual finds it difficult to meet standard living needs like buying food, clothes, paying bills and so on) might also relate to depression. In addition, various sources of financial stress might be related to mental health problems in different ways. Based on the existing reviews, it is still unknown which domains of financial stress have clearer associations with depression and whether there is heterogeneity in the relationship between financial stress and depression for different populations and contexts. Moreover, the existing reviews do not discuss the possible mechanisms underpinning the association between financial stress and depression. To better understand the association between financial stress and depression and the possible mechanisms underlying it, a systematic review was conducted bringing together a wide range of indicators of financial stress. The eligible economic indicators of financial stress in this review include objective financial variables like income, assets, wealth, indebtedness; as well as measures that capture subjective perceptions of financial stress, such as perceived financial hardship (e.g., subjective feelings of sufficiency regarding food, clothes, medical care, and housing), subjective financial situation (e.g., individuals’ feelings about their overall financial situation), subjective financial stress, subjective financial position, and financial dissatisfaction.

This study aims at providing a comprehensive review of the association between different financial stressors and depression considering the characteristics of the associations of interest and discussing the proposed mechanisms underlying the associations. An understanding of the relationship between financial stress and depression would not only advance our understanding and knowledge of the economic risk factors of mood disorders but also provide policymakers with more understanding of additional public mental health benefits of intervention aimed at alleviating poverty and/or at improving people’s financial conditions.

Search strategies

A systematic review of published literature was conducted using online searches on bibliographic databases. At the first stage, six bibliographic databases including CINAHL, PsycINFO, EMBASE, EconLit, AMED, and Business Source Premier were searched for related peer-reviewed journal articles to April 2019. The search terms are listed in Table 1 . The broad strategy was to combine terms related to finances, with terms related to depression, and terms related to the unit of analysis (individual, household etc). Several key studies that were eligible for inclusion criteria were pre-identified. Before the formal search, pilot searches were performed to make sure the pre-identified key studies can be found by the search. More details of search strategies are displayed in S1 Appendix . All the search results were limited to the English language. No time restriction was added to the search. The reference lists of the eligible studies and several relevant review papers were checked manually to supplement the main electronic searching.

Eligibility criteria

The inclusion and exclusion criteria for study selection were designed to ensure a focus on primary studies and secondary studies conducted on adults, using measures of financial stress (exposure) and depression (outcome). The eligibility criteria were tested on a selection of papers by multiple members of the study team to ensure that studies were categorised accurately. Based on the piloting process, the eligibility criteria were further modified. The following is the list of the final inclusion and exclusion criteria applied in this study.

Studies were included if they met the following criteria: (1) observational and experimental studies on the relationship between the individual or household financial stress and depression or depressive symptoms; (2) original research in peer-reviewed journals; (3) conducted on general population samples aged 18 and over; (4) used indicators which capture different dimensions of an individual or household financial stress, such as income, assets, debt, wealth, economic hardship, financial strain, financial stress, and financial satisfaction; (5) studies that measure depression through both non-clinical and clinical techniques (e.g., Centre for Epidemiologic Studies Depression Scale), were eligible for this review.

Studies were excluded if they were: (1) systematic reviews, dissertations, conference abstracts, or study protocols; (2) studies focusing on a specific population including female-only, male-only, people with a special occupation (e.g., soldiers), migrants, or people with specific illnesses; (3) studies relating to societal (as opposed individual) economic circumstances (e.g., income inequality measured at the community level or the country level) or shocks to the macroeconomy (e.g., stock market crashes, hyperinflation, banking crises, economic depressions, and financial crisis); (4) studies that only reported the joint association between several socioeconomic determinants and depression. These were included only if the association related to individual or household finances were reported and explained individually; (5) studies based on overall mental health, or other types of mental disorders (e.g., anxiety, suicide, self-harm, bipolar disorder, schizophrenia, dementia) where the association between household financial stress and depression was not reported and explained independently.

Study selection

Search strategies were applied to six databases (i.e., CINAHL, PsycINFO, EMBASE, EconLit, AMED, and Business Source Premier EBSCO) to generate a long list of candidate studies. All the search results were exported into Mendeley. Search results, after the removal of duplicates, were screened for relevance using the title and abstract information. The full texts of relevant articles were then checked for eligibility based on the selection criteria. Screening and selection were undertaken by two reviewers independently. All authors were consulted when a disagreement arose. The study selection process and reasons for study exclusions were recorded in a flow chart shown in Fig 1 .

Data analysis

A pre-designed data collection form (listed in S2 Appendix ) was used for the data extraction process. The data extracted from the eligible studies covered the following categories: (1) characteristics of studies: year, author, journal, aim of study, countries, study type, data sources, responsible rate, level of study, eligibility of ethical approval; (2) characteristics of the population: sample size, age group, mean age of the participants, gender; (3) depression measures, definition of depression, validity of the measures; (4) measures of financial stress (exposures) used, measures of the exposure, definition of the exposure, validity of the measures; (5) statistical analysis: econometric methodologies, covariates, whether reverse causality was taken into account, whether there are subgroup analyses and methods (6) main results. The key information being extracted is presented in S1 and S3 Tables, which is a simplified version of the extracted data.

This review focused on the association between each dimension of financial stress and depression and analysed the heterogeneity of the association in different contexts. The eligible studies were reviewed narratively, and the results were stratified by different indicators of financial stress (e.g., low income, low assets, low wealth, debt, financial difficulties and so on). Causal inferences and proposed mechanisms underlying the association between financial stress and depression based on the reviewed evidence were discussed in the discussion section. No meta-analysis was conducted to pool the reviewed evidence due to the substantial heterogeneity in the measurements and definitions of the exposure and outcome variables, study context, and methodologies.

Quality assessment

The quality of the included studies was assessed using an adapted version of the Quality Assessment Tool for Quantitative Studies used in Glonti et al. [ 24 ] (see S3 Appendix ). The original version of this tool is developed by the Effective Public Health Practice Project (EPHPP) [ 25 ]. Seven key domains relating to study design, selection bias, withdrawals, confounders, data collection, data analysis and reporting were considered. Studies can have between six and seven component ratings. The score of each domain equals 1 if the quality is high, 2 if the quality is moderate and 3 if the quality is low. An overall rating for each study was determined based on the ratings for all domains. The overall rating of studies’ quality was classified as high, moderate, or low. Full details of the design and usage of the quality assessment tool can be found in Glonti et al. [ 24 ]. The quality assessment of the included studies was conducted by two reviewers independently. The results of the quality assessment were based on consensus between the two reviewers.

5,134 papers were identified after searching online databases including CINAHL, PsycINFO, EMBASE, EconLit, AMED, and Business Source Premier. The flow chart for the study selection process is displayed in Fig 1 . The total number of papers after removing duplicates was 4,035. Both titles and abstracts of the identified 4,035 papers were screened. 3,763 papers were removed since they did not satisfy the eligibility criteria. The full texts of the remaining 272 papers were accessed and further screened separately by the two reviewers based on the eligible criteria. 235 papers were further excluded leading to 37 studies for consideration. The main reasons for exclusion were that the exposure, the outcome variables of interest, or the targeted population of those studies did not meet the inclusion criteria. Three additional articles were further added after checking the reference lists of all the eligible papers and those of the past relevant review papers [e.g., 18 , 21 ]. 40 articles were finally identified for the data extraction.

Study characteristics

Regarding the number of reviewed studies by years of publication, most of the reviewed studies were published in the past two decades, with a noticeable spike in the last five years. The majority of studies (32 out of 40) reported evidence from high-income European countries and the USA, Australia, Japan, and South Korea. Eight studies were based on low- and middle-countries including China, Chile, and South Africa. In terms of study design, 17 studies were cross-sectional, and 23 studies were longitudinal. The age groups considered in the 40 studies vary: 17 studies focused on the general adult population including young adults, middle-aged adults, and older adults, while 23 studies focused specifically on working-age, young adults, middle-aged, or older adults. Data of study characteristics were displayed in the data extraction form in S1 Table .

Measures of depression

The most commonly used measure for depression was the Centre for Epidemiological Studies Depression Scale (CES-D) [e.g., 26 – 28 ]. Various versions of the CES-D were used in the reviewed studies: six studies used the full version, that is, the 20-item CES-D; 19 studies used the shortened version of the CES-D scale. Other measures were also used to assess the individual’s depressive symptoms such as the Hospital Anxiety and Depression Scale (HADS) [ 29 ], the World Mental Health Composite International Diagnostic Interview (WMH-CIDI) [ 30 , 31 ], a subsection of the General Health Questionnaire (GHQ depression) [ 31 – 33 ], the Alcohol Use Disorder and Associated Disabilities Interview Schedule-IV (AUDADIS-IV) [ 34 ], the 21-item Beck Depression Inventory (BDI) [ 35 ] and the Geriatric Depression Scale (GDS) [ 15 , 36 , 37 ]. Two studies used self-reported depression by asking participants whether or not they had any experience of depression [ 13 , 38 ].

Measures of financial stress

A wide variety of concepts and measures of financial stress were used across the reviewed studies. The financial exposure in the reviewed studies can be divided roughly into two categories. First, personal or household finances, which include income, assets or wealth, debt or hardship were investigated. These economic indicators were measured in different ways. Some studies measured the total amount of assets while other studies measured assets by counting the number of durable items owned by an individual (such as motor vehicles, bicycles, computers, or cameras) or a household (such as fridges, microwaves, TV, cameras). The measures of debt were more diversified: the onset of debt, the amount of debt in general and of different types of debt, the debt-to-asset ratio, debt problems like over-indebtedness, debt arrears, and debt stress. Financial hardship was defined as difficulties in meeting the basic requirements of daily life due to a lack of financial resources. For example, not having enough money for food, clothes, shelter and medical expenses; being unable to pay bills on time or heat the home; having to sell assets; going without meals; or asking for financial help from others were used by these studies as proxies for financial hardship [ 30 , 39 ]. Second, some studies examined the associations between depression and subjective perceptions of financial stress such as perceived financial hardship (e.g., subjective feelings of insufficiency regarding food, clothes, medical care, etc.), subjective financial situation (e.g., individual’s feelings of their overall financial situation), subjective financial stress, subjective financial position, financial dissatisfaction and so on.

Quality of reviewed studies

Full details of the quality assessment of the 40 included studies are displayed in S2 Table and S1 Fig . An observational study design was utilised in all of the included papers. 29 (72.5%), and 11 (27.5%) studies were rated as methodologically strong [ 6 , 13 – 16 , 20 , 26 – 28 , 30 , 31 , 34 , 37 – 53 ] and moderate [ 29 , 31 , 32 , 35 , 36 , 54 – 59 ], respectively. Among the 40 included studies, 34 (85%) had a low risk of selection bias, five (12.5%) had a moderate risk and one had a high risk of selection bias. Eight studies were able to be rated on withdrawals and drop-outs: two of them were rated as “strong”, four achieved a “moderate” rating and one received a “weak” rating. We found that 15 studies (37.5%) had a low risk while 25 (62.5%) had a moderate risk of confounding bias. Regarding the data collection, two studies were rated as ‘strong’, 37 received a ‘strong’ score, and one study was rated as ‘weak’. All the studies received a ‘strong’ rating for data analysis except for one study that was rated as ‘weak’. 35 (87.5%) studies received a ‘strong’ rating for reporting, while five studies had a ‘moderate’ quality of reporting.

Association between income and depression

Eleven studies were identified examining the relationship between individual or household income levels and depression. All controlled for other socioeconomic confounders or/and health status. Seven studies found a statistically significant association between low income and a higher risk of depressive symptoms after adjustment. The positive association between low income and depression was reported in both high-income countries and low- and middle-income countries and found in different age groups (i.e., younger adults, middle-aged adults, and older adults).

The intertemporal relationship between individual or household income and depression was investigated in three longitudinal studies [ 20 , 34 , 58 ]. Osafo et al. found that in the UK, an increase in household relative income (i.e., income rank) was statistically related to a decreased risk of depression at a given time point [ 58 ]. The effect of household income at baseline on the risk of showing depressive symptoms in the following time point was weakened but still statistically significant, controlling for the baseline depression level. Lund and Cois reported similar results: they found that lower household income at baseline could predict a worse depression status during the follow-up period in South Africa [ 20 ]. Based on evidence from the US, Sareen et al. found that individuals with lower levels of household income faced an increased risk of depression compared to those with higher levels of household income [ 34 ]. Furthermore, a reduction in income was also related to an increased risk of depression [ 34 ].

Focusing on pension income, which is one of the main sources of household income for the retired population, Chen et al. found that pension enrolment and pension income were significantly associated with a reduction in CESD scores among Chinese older adults, controlling for other socioeconomic factors and health status [ 43 ].

The strength of the relationship between income and depression varies and can be affected by how income is measured. For example, compared to absolute income, a household’s relative income level within a reference group was found to be a more consistent household financial predictor of depression [ 58 ]. Osafo et al. compared the effect of relative income with that of the absolute value of household income [ 58 ]. They found that a deterioration in the rank of household income was associated with a higher possibility of showing depression at a given time point, as well as the subsequent time point [ 58 ].

The relationship between income and depression holds for all income groups but is more pronounced among lower-income groups. According to Zimmerman and Katon, the association between depression and income is stronger among people with income levels below the median [ 16 ]. Based on a quasi-natural experiment, Reeves et al. also found that the reduction in housing benefits significantly increased the prevalence of depression for low-income UK households [ 38 ]. Additionally, the association between pension income and depressive symptoms in older adults were more pronounced among lower-income groups [ 43 ]. More broadly, the income-depression relationship might be influenced by the economic status of the regions where households live. For example, Jo et al. found that the association between income and depression was significant among participants from low-economic-status regions, while it was insignificant among participants from high-economic-status regions [ 55 ].

Association between material assets and depression

Two studies on the relationship between assets and depression were identified: one cross-sectional study [ 29 ] and one longitudinal study [ 20 ]. Those studies showed that assets were a significant predictor of depression after controlling for demographic and other socioeconomic confounders. Furthermore, the household assets-depression association was found to be stronger for individuals with lower levels of assets at baseline [ 20 , 29 ]. The directions of the assets-depression relationship were investigated in one study. Lund and Cois simultaneously examined both directions of the relationships using a nationally representative survey on South Africa [ 20 ]. They found that low levels of individual and household material assets were significantly related to depression in the follow-up period after controlling for age, gender, race and education. Conversely, having more depression symptoms at baseline was significantly associated with lower levels of individual assets in the follow-up period [ 20 ].

Association between wealth and depression

Three studies explored the relationship between wealth and depression in adults. All of them were based on high-income country contexts including the UK and the US and suggested a positive relationship between individual or household low wealth and depression among middle-aged and older adults. Two longitudinal studies examined the association between wealth and depression. Specifically, Pool et al. found that an increase in household wealth was statistically related to a decrease in the risk of depressive symptoms [ 50 ]. Osafo et al. compared the effect of relative wealth (i.e., wealth rank) and absolute wealth on depressive symptoms [ 58 ]. Their results showed that, instead of the absolute wealth, the wealth rank within a social comparison group was the primary driver of the association between wealth and depressive symptoms [ 58 ]. The strength of the relationship between wealth and depression varies according to the level of wealth at baseline [ 58 ]. For example, Martikainen et al. found the association between household wealth and depression was most pronounced among the lowest wealth group [ 33 ].

Association between debt and depression

Fourteen studies investigated the association between debt and depression and provided empirical evidence based on high-income countries (Europe and the US) and Chile. Three studies were cross-sectional and all of them reported a positive association between debt (assessed by student debt, the occurrence of any debt, or unsecured debt) and depressive symptoms after controlling for demographic and other socioeconomic factors [ 6 , 27 , 53 ]. Eleven longitudinal studies identified by this review investigated the association between debt and depression over time. The definitions and measures of debt vary across studies. Associations between the occurrence and/or amount of financial debt, the occurrence and/or amount of housing debt, excessive mortgage debt, the occurrence of any debt, the debt-to-asset ratio, and the debt-to-income ratio, on the one hand, and depression, on the other, were investigated in the reviewed studies.

The association between changes in debt status and changes in depressive symptoms was investigated in six studies. Specifically, using five waves of data from the Survey of Health, Ageing and Retirement in Europe (SHARE), Hiilamo and Grundy found that both men and women switched from having no financial debt to having substantial financial debt suffered from a deterioration in depressive symptoms [ 28 ]. Also, switching from no mortgage debt to having substantial mortgage debt was positively associated with the deterioration in depressive symptoms among women [ 28 ]. Using a large nationally representative dataset from the Chilean Social Protection Survey (SPS), Hojman et al. also found that individuals who were always over-indebted or switch from having moderate levels of debt to over-indebtedness had more depressive symptoms than those who were never over-indebted [ 46 ]. Additionally, they found that those who were not over-indebted, regardless of the previous debt status, did not experience a worsening in depression, showing that the effect of over-indebtedness on depressive symptoms faded away as the debt levels decreased [ 46 ].

Various measures of debt were used in the reviewed studies such as the occurrence of debt [ 26 , 27 , 53 ], the amount of debt [ 6 , 14 , 26 , 28 , 53 ], and the debt-to-income ratio or debt-to-asset ratio [ 14 , 46 , 48 ]. The debt-depression relationship varies with different operationalisations of debt with the debt to asset ratio being a more reliable predictor of depression than the total debt. Both Sweet et al. and Hojman et al. found that only the debt-to-assets ratio or debt-to-income ratio (rather than the absolute amount of debt) were consistently and positively associated with higher depression scores before and after adjustment (see S1 and S3 Tables for details of the covariates used) [ 14 , 46 ].

Different types of debt such as secured debt (e.g., mortgage debt) and unsecured debt (e.g., consumer debt) might be related to the depression in different ways. The reviewed studies reported a positive association between high levels of mortgage debt and high unsecured consumer debt (regardless of the amount) and depression [ 14 , 48 , 53 ]. For example, Leung and Lau examined the causal relationship between mortgage debt and depressive symptoms and found that a high level of mortgage indebtedness (defined as a mortgage loan to home value ratio over 80%) was associated with more depressive symptoms among mortgagors [ 48 ]. Both Zurlo et al. and Sweet et al. found that unsecured debt (e.g., consumer debt) was a significant predictor of more depressive symptoms [ 14 , 53 ]. Three studies compared the effect of different types of household debts on depression [ 26 , 28 , 46 ]. The results of those three studies suggested that the association between household debt and depressive symptoms was predominantly driven by short-term debt. Specifically, unsecured debt (e.g., financial debt), or short-term debt were associated with a higher risk of experiencing depression, while secured debt itself (e.g., mortgage debt) or long-term debt were not related to depressive symptoms. For example, using longitudinal data from the Survey of Health, Ageing and Retirement in Europe (SHARE), Hiilamo and Grundy found that household financial debt was positively and significantly associated with more depressive symptoms, while the effect of household housing debt on depression was weak or even insignificant [ 28 ]. Berger et al. found a similar result using longitudinal data from the US. Their results (controlling for baseline characteristics and socioeconomic factors) showed that only short-term debt (i.e., unsecured debt) was positively and statistically significantly associated with depressive symptoms, while the effects of mid-term and long-term debt (e.g., mortgage loan) on depressive symptoms were not significant [ 26 ].

However, it is not always the case that the association between debt and depressive symptoms is only driven by consumer debt. As reported in two longitudinal studies by Hiilamo and Grundy and by Gathergood, a secured debt like mortgage might be associated with depression when the secured debt becomes a problem debt [ 28 , 32 ]. Hojman et al. found that mortgage debt had no association with depressive symptoms, while consumer debt was positively and significantly related to more depressive symptoms [ 28 ]. Nevertheless, both Hojman et al. and Alley et al. found that mortgage arrears had a significant effect on more severe depression, even when the effect of consumer debt on depression was controlled [ 40 , 46 ]. In line with their study, Gathergood also found that housing payment problems were strongly associated with a higher depression score [ 32 ].

Association between financial hardship and depression

The association between financial hardship and depression was reported in four studies, all of which were based on high-income countries such as the US and Australia [ 15 , 30 , 39 , 52 ]. They all observed a cross-sectionally positive relationship between financial hardship and depression, which holds after adjustments (see S1 and S3 Tables for details of the covariates used). The intertemporal association between financial hardship and depressive symptoms was reported in two longitudinal studies [ 15 , 39 ]. However, the consistency of the findings is sensitive to the statistical methods applied. Mirowsky and Ross found that current financial hardship was associated with a subsequent increase in depression in the US [ 39 ]. The other study only observed an association between financial hardship at baseline and baseline depression, as well as a weak or even no association between prior financial hardship and current depression [ 15 ]. When the same statistical strategy was applied, the findings from Butterworth et al. were consistent with those were observed in Mirowsky and Ross’s study [ 15 , 39 ].

Furthermore, the reviewed studies showed that the effect of past financial hardship on depressive symptoms decayed with time. In other words, current financial hardship mattered the most for current depressive symptoms. Following Mirowsky and Ross, changes in financial hardship were stratified into four types [ 39 ]. An individual experiencing (not experiencing) current financial hardship and hardship in the past belongs to the always hardship group (no hardship group). An individual experiencing only current (past) financial hardship belongs to the new hardship group (resolved hardship group). Mirowsky and Ross found that the effects of consistent hardship and new financial hardship (3 years later) on depressive symptoms were positive and significant [ 39 ]. Moreover, there was no significant difference in the follow-up depressive symptoms between the consistent hardship group and the new hardship group [ 39 ]. Furthermore, the association between both resolved hardship and no hardship on depressive symptoms was not significant [ 39 ]. Consistent with this, Butterworth et al. also found that the individuals who currently experienced financial hardship were more likely to have depression than those who only experienced financial hardship in the past or never experienced it [ 15 ].

Age was the most analysed moderator of the association between financial hardship and depressive symptoms among the reviewed studies. This review found that there is no consistency in terms of the association between financial hardship and depression across different age groups. Butterworth et al. reported that the effect of financial hardship on depressive symptoms increased with age among Australian adults [ 30 ]. However, Butterworth et al. and Mirowsky and Ross reported different results [ 15 , 39 ]. Specifically, they found that the positive association between financial hardship and depressive symptoms decreased with age in the US. In contrast to the two studies listed above, Butterworth et al. did not find any statistically significant differences regarding this association among different age cohorts in Australia [ 15 ].

Association between subjective financial strain and depression

Eleven studies examined the association between subjective financial indicators (i.e., subjective financial strain, financial dissatisfaction or financial stress) and depression, providing empirical evidence based on high-income countries (Europe, the US, the UK, Japan and Korea) and on China. All of them (including four cross-sectional and seven longitudinal studies) reported a positive relationship between subjective financial strain and depression, holding after adjustments (see S1 and S3 Tables for details of the covariates used)). The intertemporal association between subjective financial strain and depression was reported in two studies [ 44 , 59 ]. For example, Richardson et al. found that increased subjective stress at baseline was associated with greater depression over time [ 59 ]. Similarly, Chi and Chou also found that higher levels of subjective financial strain measured at baseline were associated with more depressive symptoms after three years among Chinese older people [ 44 ]. The association between changes in subjective financial strain and depression was found in one longitudinal study [ 49 ]. Using data from the annual Belgian Household Panel Survey, Lorant et al. found that the worsening subjective financial strain was significantly associated with the increased risk of depressive symptoms and that of caseness of depression [ 49 ].

The positive and significant association between perceived financial strain in childhood and depression in adults was found in both a cross-sectional study and a longitudinal study [ 42 , 47 ]. Using cross-sectional data from 19 European countries in 2014, Boe et al. found that younger adults (25–40) who had experienced financial difficulties as children had higher depression scores in adulthood, while older adults (over 40) did not [ 42 ]. A similar association between adverse childhood financial situation and adults’ depression was also found in a longitudinal study [ 47 ]. Based on a national representative sample of 9,645 South Korean adults without depressive symptoms at baseline, Kim, et al. found that experiencing financial difficulties in childhood was associated with the increased chance of depression in adulthood [ 47 ]. Furthermore, the effect of experiencing financial difficulties in childhood on depression was weaker than that of current financial difficulties [ 47 ].

The gender difference of the association between perceived financial strain and depression was examined in two studies and no statistical difference between females and males was observed, though women tended to report worse depression [ 36 , 44 ].

Summary and discussion of the findings

This systematic review is the most comprehensive synthesis of observational studies quantifying the association between indicators of financial stress and depression in both high- and low- and middle-income countries to date. Findings regarding the relationship between financial stress and depression vary across different indicators of financial stress. Economic indicators such as material assets, unsecured debt, financial hardship, and subjective measures of financial stress are relatively strong and persistent predictors of depressive symptoms, while absolute income and wealth levels have an inconclusive association with depression. The only longitudinal evidence on relative income and relative wealth suggests a stronger relationship between relative income or relative wealth and depressive symptoms than that between absolute income or wealth and depression. Additionally, this review finds that the association between indicators such as income, material assets or wealth and depression is more pronounced in lower socioeconomic groups (i.e., low income or low wealth group). This review is unable to make a conclusion regarding the association between debt and depression across different socioeconomic subgroups. The only evidence is provided in one study showing that there is no difference in the association between debt and depression by assets level. Additionally, there is insufficient evidence to conclude a common pattern regarding the association between financial stressors and depression by gender or age groups, though differences of this relationship across age or gender groups are observed in some of the reviewed studies.

The income-depression association is inconclusive, although income is one of the most commonly used indicators of the individual or household’s economic situation. The reviewed studies consistently reported a positive association between low income and depressive symptoms in univariable analyses. However, this association was largely reduced or even became insignificant when other social and economic factors (such as educational level, employment status and so on) and health status were controlled for [ 31 , 33 ]. The findings are consistent with the results from the previous reviews and empirical research where different mental disorders were considered including depression [ 18 , 23 , 60 ]. It is likely that income has a close correlation with other dimensions of the socioeconomic condition such as educational levels and employment status that affect an individual’s mental health independently from income per se [ 23 ].

Furthermore, this review finds that compared to absolute income (or wealth), relative income (or wealth) in a reference group is a more important risk factor of depression. There is evidence showing a positive association between low-income ranks and current depression scores as well as follow-up depression scores, while no association is found between absolute low income and depression [ 58 ]. The findings here are in line with the previous review, which mainly focused on the association between income inequality and depression [ 61 ]. Patel et al.’s review concluded that a higher level of income inequality at the neighbourhood level was strongly associated with a higher risk of depression [ 61 ]. This review only identified one study investigating the association between relative income or relative wealth and depression. The insufficient evidence on this topic suggests the need for more research to investigate the mental health effects of relative income (or wealth).

Some of the reviewed studies have suggested a positive association between debt and depression despite the substantial heterogeneity in definitions and measurements of debt, study methods, study contexts, and targeted population. The association between debt and depressive symptoms is mainly driven by unsecured debt (e.g., credit card) or late mortgage payments. Secured debt (e.g., mortgage debt) per se is not associated with depressive symptoms. However, depression may still be more likely when individuals or households are no longer able to manage their debt or perform debt obligations. For example, the reviewed evidence shows that mortgage arrears have a significant effect on more severe depression, even when the effect of consumer debt and mortgage debt on depressive symptoms are considered within the same model [ 46 , 48 ]. The findings regarding the relationship between debt and depression are consistent with the findings from the previous reviews on the association between debt and health where depression was one of the outcomes [ 22 , 62 ].

An important consideration regarding the debt-depression relationship is that having personal or household debt does not always lead to depression, as debt is not always a sign of financial problems. Some personal and household loans are taken to finance housing purchases, business, and investments, which are granted based on the borrower’s financial situation and payback abilities. Additionally, except for stress, debt might also bring benefits to mental well-being by generating consumption, feelings of attainment or satisfaction or making investments [ 63 , 64 ]. As a result, the financial stress derived from debt could be partially offset by such positive mental well-being effects. The review suggests that future longitudinal research on the impact of debt on depression should consider mediators to understand the nature of the causal association between debt and mental health.

It should be noted that nearly a half of the reviewed studies are cross-sectional, limiting the ability to draw a conclusion on the directions and the causality of the associations between some indicators of financial stress and depression. A few of the longitudinal studies considered the reverse relationship and/or the unobserved bias using econometric methods. The majority of these longitudinal studies mainly focused on the relationship between debt or subjective measures of financial stress and depression. They provide supportive evidence that, debt and subjective financial stress might lead to subsequent depressive symptoms. Longitudinal evidence remains limited as to the understanding of both directions and causality of the relationships between other indicators of financial stress and depression. For example, only three longitudinal studies provided an exploration of the association between income and depression. The casual relationship between some indicators of financial stress (such as low income, material assets, wealth, financial hardship) and depression should therefore be interpreted with caution.

This review includes a number of studies focusing on the older-aged population. The signs of the relationship between financial stress and depression in different age subgroups do not show a significant difference. Despite this, it should be noted that there might be heterogeneity in the magnitude of the relationship between financial stress and depression across different age subgroups. However, it is difficult to identify if including the studies based on adults aged 50 and over would make the generalisability of the findings towards this population. Because a cross-study comparison is almost impossible as there is a substantial heterogeneity in different studies regarding country contexts, measurements of exposures and outcome variables, study methods and so on.

Based on the reviewed evidence, three possible mechanisms may be behind the relationship between financial stress and depression.

Social causation

Firstly, as highlighted in the introduction, the effects of financial stress on depression can be explained by social causation theory. The reviewed evidence supports the social causation pathway according to which individuals or households who have low income or low wealth are more likely to be exposed to economic uncertainty, unhealthy lifestyle, worse living environment, deprivation, malnutrition, decreased social capital and so on [ 20 , 47 , 65 ]. Those factors might lead to a higher risk of developing depressive symptoms. Individuals or households with limited financial resources are more vulnerable to stressful financial events, which might increase the risk of experiencing depression. This mechanism is applicable to the studies where financial stress is measured by economic indicators related to poverty, such as income poverty, deprivation, and financial hardship.

Psychological stress

The reviewed studies also show that subjective measures of financial stress have adverse effects on depression. Indeed, some studies state that subjective financial stress is more important than objective measures such as the amount of debt [ 13 , 41 , 66 ]. Objective indicators of financial stress might have an indirect effect on depression, which is mediated by the individual’s perception of those objective indicators as resulting in financial stress. Experiencing a similar objective financial situation, people may report different perceptions of the objective financial situation due to the heterogeneity of personal experiences, abilities to manage financial resources, aspirations, and perceived sufficiency of financial resources [ 67 ]. For example, individuals with limited financial resources are more likely to be concerned about the uncertainty of the future financial situation. The expectation of financial stress, not just their occurrence, may also cause depression. Furthermore, people living in poverty face substantial uncertainty and income volatility. The long-run exposure to stress from coping with this volatility may also threaten mental health [ 68 ]. Therefore, it is reasonable to believe that both the respondent’s perception of financial stress and objective measures of financial stress lie at the heart of the relationship between financial stress and depression.

Social selection

Other studies suggest that depression might negatively impact the finances of individuals [ 20 , 69 ]. Social selection theory states that individuals who have mental disorders are more likely to drift into or maintain a worse financial situation [ 20 ]. Evidence shows that mental problems might increase expenditure on healthcare, reduce productivity, and lead to unemployment, as well as be associated with social stigma, all of which are related to lower levels of income [ 18 , 65 , 70 ]. However, some scholars argue that the relative importance of social causation and social selection varies by diagnosis [ 71 ]. Social causation theory is more important to the relationship between financial stress and depression or substance use; while social selection theory is more important in relation to severe mental disorders such as schizophrenia [ 70 , 72 ].

Limitations of the review

This systematic review is the first to comprehensively pool observational studies on the association between individual or household finances and depression or depressive symptoms. However, this review is subject to several limitations. First, since there is substantial heterogeneity in the measurements and definitions of exposure (financial stress) and the outcome variable (depression), targeted populations, and methodologies between studies, a meta-analysis combining the data from the reviewed studies is neither appropriate nor practical. As such, only a narrative approach is used in this review without quantitatively synthesising the data from the studies, which are difficult to compare. Second, the majority of studies reported evidence on high-income countries like the US, the UK, European countries. Therefore, the conclusions of this review are more immediately generalisable to these contexts as opposed to low-and middle-income country contexts. Third, this review undertakes the search on six databases for any related peer-reviewed journal articles without searching for other resources to find grey or unpublished literature and conference abstracts. Excluding the unpublished studies might limit the findings of this review since studies with significant results are more likely to get published [ 73 ]. The published studies may lead this review to overestimate the associations between any financial exposures and depressive symptoms. Fourth, the included exposures in this review are the most direct indicators (i.e., proximal indicators) of financial stress. The findings in this review might not be generalisable to the relationship between a distal factor (e.g., job loss) and depression. Evidence has suggested that a significant life event or experience, for example, job loss, is associated with financial stress and thereby can predict subsequent major depression [ 74 ]. Future review on financial stress and mental health outcomes might benefit from further including the effect of distal factors (such as job loss, changes in working hours, changes in marital status, and so on) on mental health.

Implications

This review has a number of implications for public policy around financial circumstances and depression. Firstly, it highlights the role that measures aimed at alleviating financial poverty and inequality could have in improving public mental health. Secondly, it suggests attention needs to be focused on unsecured debt as a public health measure. For example, providing financial counselling services and financial education to those who have debt stress and depression may help them to effectively deal with individual debt problems and associated depression. Meanwhile, the regulation of unsecured debt markets is crucial to the sustainable development of unsecured lending markets, and thereby supports both financial health and mental health. Thirdly, this review highlights the importance of targeted interventions to break the cycle of financial stress and depression. For example, instead of a one-for-all intervention focusing on the general population, interventions targeted at lower socioeconomic groups might be more effective since the association between financial stress and depression is more pronounced in these groups.

In terms of practical support, the interdisciplinary collaboration of psychologists and financial professionals in the development of interventions aiming to break the vicious cycle of depression and financial stress could be useful. For example, interventions such as poverty alleviation programs, the provision of financial advice or financial education might have a beneficial influence on mental health. The collaboration of policymakers in both mental health areas and financial areas might create win-win situations, having mutual benefits for both areas and saving costs to society in the long run.

Finally, this review highlights the need for further research in certain areas. First, this review suggests that more longitudinal research or randomised control trials (where feasible) are needed to further clarify the directions of the causal relationships and possible mechanisms between different financial stressors and depression or other mental disorders. A better understanding of this can help to design more effective interventions either aimed at alleviating financial stress or at improving mental health. For example, anti-poverty programs such as direct cash transfers might be more helpful for families in poverty or deprivation, where social causation plays the main role in the effect of financial stress on depression. However, if financial stress is due to social comparison, rather than absolute poverty, challenging social attitudes may be more beneficial. This review also calls for more future research to investigate the heterogeneity of the relationship and the difference in the direction of the relationship between financial stress and depression or other mental disorders across different populations. This would provide more precise and solid evidence for developing targeted interventions as noted above.

Second, this review finds that the majority of the existing studies on the financial stress-depression relationship are based on high-income countries. However, low-and middle-income countries have higher levels of poverty and economic inequality, as well as a high economic burden caused by mental disorders and low levels of investment in mental health [ 69 , 75 ]. Therefore, more future research that is based on low-and middle-income country contexts would be important.

In conclusion, this systematic review of the link between financial stress and depression in adults found that financial stress is positively associated with depression, in particular among low socioeconomic groups. The findings suggest directions for policymakers and the need for greater collaboration between psychology and financial professionals, which will be beneficial to developing targeted interventions either to mitigate depression or alleviate financial stress. Further longitudinal research would be useful to investigate the causality and mechanisms of the relationship between different dimensions of financial stress and depression.

Supporting information

S1 checklist, s1 appendix, s2 appendix, s3 appendix, acknowledgments.

We would like to thank two anonymous reviewers for their comments that helped to improve and clarify the manuscript.

Funding Statement

The author(s) received no specific funding for this work.

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Fintech and corporate governance: at times of financial crisis

• Open access
• Published: 10 August 2023
• Volume 24 , pages 605–628, ( 2024 )

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• Khakan Najaf   ORCID: orcid.org/0000-0003-4731-881X 1 ,
• Alice Chin 2 ,
• Adrian Lean Wan Fook 3 ,
• Mohamed M. Dhiaf 4 &
• Kaveh Asiaei 1  

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The objective of this research is to probe the moderating role of Big Four auditors (a representative of corporate governance) on the market performance of firms during the pandemic period, with specific focus on Fintech and non-Fintech firms. Design/Methodology: Employing data from 48 Fintech and 140 non-Fintech firms spanning 2010 to 2021, the study utilizes ordinary least squares, quantile regression, and dynamic Generalised Moments Method (GMM) regression to assess the implications of engaging with a Big Four auditor on firms' market performance during the pandemic. The study reveals that Fintech firms, compared to their non-Fintech counterparts, displayed a significantly poorer market performance by 110.4% during the pandemic. Additionally, Fintech firms audited by a Big Four auditor experienced a decline in market performance by 101.9%, indicating a potential negative impact of Big Four auditors' engagement for Fintech firms in crisis periods. The outcomes of this research underscore the importance of corporate governance during financial crises, and its influence on shareholder perception, especially in the context of Fintech firms. As such, it provides meaningful insights for governments, policymakers, and various practitioners including firm shareholders and start-up entrepreneurs. This study introduces a novel examination of the moderating effect of Big Four auditors on firms' market performance during a pandemic, especially in the context of Fintech firms. By shedding light on the relationship between corporate governance and market performance during crises, it fills a significant gap in the existing literature.

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1 Introduction

Financial Stability Board described Fintech as “technologically enabled financial innovation that could result in new business models, applications, processes, or products with an associated material effect on financial markets and institutions and the provision of financial services”. Meanwhile, Thakor [ 55 ] defined “Fintech” as the delivery of new and upgraded financial services through the application of technologies. Unlike established financial institutions with more conventional approaches, Fintech firms are young start-up firms that deliver financial products and services through the use of technological innovations [ 28 ]. The capacity of Fintech firms to compete with established non-Fintech firms lies in their advantages in technological innovations, speed-to-market, lower information acquisition and compliance costs, better access to financial products for customers, and different regulatory regimes [ 18 , 19 , 25 , 27 , 28 , 45 ]. However, Fintech firms can be highly vulnerable to economic shocks. In fact, the value of these firms typically drops by three-quarters during a financial crisis.

Prior studies did not explore the influence of corporate governance on investors’ perceptions towards Fintech firms during a pandemic period. Exploring this phenomenon is imperative considering the accountability of public-listed Fintech firms towards their shareholders. Moreover, the collapse of Fintech firms during a financial crisis is highly plausible due to their weak corporate governance. Considering that, the current study postulated the potential of firms’ corporate governance in mitigating or strengthening their market performance during a pandemic period. Big Four auditors (proxy of corporate governance) offer auditing of higher quality and possess more resources than non-Big Four auditors. However, the latter group of auditors have comparable strengths in certain areas, such as higher engagement during a pandemic period. After all, personnel of non-Big Four auditors are generally more familiar with the local markets and have stronger connections with the local business communities.

The market performance of Fintech and non-Fintech firms during a pandemic period has remained significantly underexplored. This study empirically found that Fintech firms audited by a Big Four auditor would significantly underperform than those audited by a non-Big Four auditor during a financial crisis. The reported results of this study were deemed robust considering the study took the necessary measures of controlling factors of market performance in the regression models, endogeneity test, and heteroscedasticity test. Furthermore, the potential sample selection biases were addressed using Miller’s ratio accordingly.

The studies have demonstrated the key strengths of Fintech firms in delivering products and services through innovative technologies with minimal capital requirements in a lower regulatory environment [ 7 , 19 , 25 ]. Through the shadow banking system, these key attributes have enabled Fintech firms to expand their market share across diverse banking services [ 25 , 54 ]. Fintech and non-Fintech firms may offer similar products or services, but their operations are different in terms of business models, competitive positioning, and regulatory structures [ 9 ], resulting in different market performance. The current study evaluated the resultant patterns of Tobin’s Q in the case of severe external shocks, such as the global COVID-19 pandemic. The obtained findings on Fintech firms’ and non-Fintech firms’ market performance during the pandemic period provided a better understanding on the responses of these firms during a financial crisis.

This study performed ordinary least squares (OLS), quantile regression, and dynamic Generalised Moments Method (GMM) regression to assess how the COVID-19 pandemic period and corporate governance (CG) policies influence firms’ market performance during the first two years of the pandemic within the U.S. context. The development and expansion of Fintech firms globally, particularly Australia, U.K., Europe, and China, have been extensively explored in various studies (see Thakor [ 55 ],Wang et al. [ 56 ]. The current study served as the first of its kind to examine the moderating effect of Big Four auditors (proxy of corporate governance) on Fintech firms’ and non-Fintech firms’ market performance (proxied as Tobin’s Q) during the pandemic period. This study presented empirical evidence on the negative market returns for Fintech firms audited by a Big Four auditor during the pandemic period, indicating investors’ negative perceptions towards Fintech firms during the pandemic and post-pandemic periods.

This study is beneficial for several stakeholders. Investors can make more informed decisions regarding resource allocation by understanding the influence of auditor selection and corporate governance on firms' market performance during crisis periods. Fintech and non-Fintech firms can use the study's insights to guide their auditor selection process, better anticipating the potential impact of this decision on their market performance during crisis periods. Auditing firms, particularly the Big Four, can gain insight into their perceived market value, potentially informing strategies to enhance their appeal to clients. Regulatory bodies and policymakers can use this empirical evidence to inform the development of policy and regulations related to financial auditing and corporate governance. Additionally, academics and researchers may find this study contributes to the literature on the role of corporate governance in crisis management, providing a new empirical context and a novel focus.

This paper is organised as follows: the theoretical background of the study and the development of hypotheses are described in the next section. The third section describes the study’s method, sample, and data, followed by the results and discussion in the fourth section. The fifth and final section presents the study’s conclusions.

2 Theoretical background and development of hypotheses

The relationship between firms’ governance and their market value has been explored in various contexts, such as management, finance, and accounting. Literature has revealed two contradicting views on the role of CG in shaping a firm’s market value (see Ferrell, Liang, and Renneboog [ 23 ]: the agency theory and good governance theory.

According to Berle and Means [ 5 ], firms should focus on maximising their market value in the interests of shareholders, instead of investing on CG, due to the potential agency issues between the firm managers and shareholders. Furthermore, the agency theory suggests the need for firm managers to engage in CG activities, instead of focusing on shareholders’ wealth maximisation. Brown, Helland, and Smith [ 8 ] highlighted the significant role of agency costs in elucidating CG activities. In another study, Di Giuli and Kostovetsky [ 20 ] found that higher investment in CG activities would reduce future stock returns and return on assets (ROA), implying that CG compromises a firm’s value. Meanwhile, Masulis and Reza [ 41 ] demonstrated the positive influence of firm governance on the interests of CEO. On the other hand, McWilliams and Siegel [ 43 ] and Margolis et al. [ 42 ] noted the influence of a critical endogeneity issue on the concluded findings on the positive relationship between CG and market performance.

Meanwhile, the good governance theory postulates the positive influence of CG performance on firms’ reputation and governance capital, which help firms to gain investors’ trust. This would subsequently increase their market value, as investors’ reputational premium in their value secures the interests of shareholders, especially during a crisis [ 39 ]. In line with the good governance theory, firms with high-quality CG demonstrate lower information asymmetry [ 10 ], idiosyncratic risk, financial distress probability [ 4 , 37 ], capital cost [ 1 , 15 , 26 , 29 ], risk of engaging in earnings management through discretionary accruals or real operations [ 38 ], fraud risk and severity [ 30 ], and forecasting errors by analysts (Dhaliwal, Radhakrishnan, Tsang, and Yang, 2014), as well as higher firm value, fewer agency issues [ 23 ], stronger response to earnings announcements, and smaller post earnings announcement drift (Bartov and Li, 2019).

Karpoff et al. [ 32 ] reported that financial misrepresentation resulted in considerable reputation-related loss of about 25% of firm value. Besides that, Chakravarthy et al. [ 11 ] found that firms would obtain abnormal returns and establish reputational capital despite the intentional financial misreporting (proxy of weak CG) when their firm managers took the initiative to regain investors’ loss of trust in management. Focusing on the 2008–2009 financial crisis, Li et al. [ 39 ] demonstrated that, as compared to firms with weak CG, firms with better CG had more debt and recorded higher stock price performance, profitability, firm growth, and sales per employee. The study further elaborated that higher CG gains the trust of stakeholders and investors despite the unfavourable implications on the overall level of trust in firms and markets. On a similar note, Shiu and Yang [ 53 ] elaborated that a firm’s long-term engagement in CG activities reflects moral capital that protects stock and bond prices against unfavourable effects of events. However, the study noted the diminishing “protection” in the case of frequent re-occurrence of the negative events.

In another study, Christensen [ 12 ] reported lower propensity for firms to be involved in high-profile misconducts, such as bribery, misleading advertising, product liability, and unpaid wages, when they release a corporate accountability report. The study further revealed that the prior release of this report can mitigate the adverse effects of stock price drop in response to poor investment in CG activities. After all, the manipulation of a firm’s “true value”, resulting in overstated CG qualities, would be exposed following its adjustment with the “market value”, which would lead to legal penalties, including regulatory fines and class-action lawsuits.

In a more recent study, Najaf et al. [ 46 ] reported that Fintech firms with stronger CG exhibited less negative stock price response, whereas Fintech firms with weaker CG exhibited more negative stock price response. The current study similarly examined the influence of CG on Fintech firms’ market performance, but this study was different from this prior study of Najaf et al. [ 49 ] in terms of research question, design, and findings. Focusing on the pre-COVID-19 pandemic period, Najaf et al. [ 47 ] concluded that CG can alleviate negative market response, which supported the findings of earlier studies. On the other hand, the current study served as the first of its kind to divide the sample into the following subsamples to demonstrate the relationship between CG and Fintech firms’ and non-Fintech firms’ market performance during the pandemic period: (1) pre-COVID-19 pandemic period,(2) post-COVID-19 pandemic period.

Based on the review of literature, two hypotheses were proposed for testing in this study. Firstly, Fintech firms generally do not have extensive clientele and capital base of their banking intermediary competitors despite their significant expansion in the recent years [ 7 , 54 ]. Considering that, this study expected that the external shocks of the global COVID-19 pandemic would significantly affect Fintech firms more than non-Fintech firms. With that, the following hypothesis was tested:

H1 Fintech firms experience poorer market performance than non-Fintech firms during the COVID-19 pandemic period.

The ownership structure of Fintech firms is more concentrated than that of non-Fintech firms. A non-Big Four auditor would be a better choice for firms due to its more focused monitoring during the pandemic period. The auditing quality of a Big Four auditor is undoubtedly exceptional. However, considering that the pandemic period has placed non-Big Four auditors under excessive scrutiny, the size of the selected auditor (i.e., Big Four or non-Big Four) may influence investors’ perceptions during the pandemic period. Furthermore, non-Big Four auditors have upper hand when it comes to capital cost and financial profit, making them a preferred choice over Big Four auditors.

The key strength of Fintech firms lies in their positioning in the CG quality [ 47 ]. Financial products and services are necessary during the pandemic following the lockdown measures that result in business shutdowns and require the public to remain home and practise social distancing. As a result, digital solutions offered by Fintech firms are highly in demand during the pandemic period. However, investing in CG activities for Fintech firms, such as engaging with a Big Four auditor, may call for different perceptions among investors. Thus, with respect to the agency theory, this study hypothesised the following:

H2 Fintech and non-Fintech firms demonstrate different market performance during the COVID-19 pandemic period due to their CG policies.

3 Method, sample, and data

Earlier studies demonstrated better sustainability and governance measures by Fintech firms, in comparison to non-Fintech firms (Dhaif et al., 2022; [ 49 ]. Addressing the identified research gaps, the current study compared both firms, specifically during the COVID-19 pandemic period. The testing of hypotheses in this study involved two key issues, specifically on (1) the market performance of Fintech firms (versus non-Fintech firms) during a financial crisis and (2) the market performance of Fintech firms audited by a Big Four auditor (versus a non-Big Four auditor) during a financial crisis.

Therefore, all relevant data from 2010 to 2021 were gathered and then split into (1) data of the pre-COVID-19 pandemic period (2011–2019) and (2) data of the post-COVID-19 pandemic period (2020–2022). We select this sample period because the year 2010 marks a point in time when the financial services industry began to see significant technological disruption, with the emergence of many Fintech firms. The sample period is until 2021 because it includes the global COVID-19 pandemic, which has had unprecedented impacts on all sectors of the economy, including financial services.

Firstly, an Index of Fintech firms, which was established in July 2016, was sourced from the well-established Nasdaq Financial Technology Index (KFTX). In particular, 48 Fintech firms were listed. KFTX is established to monitor the performance of public-listed Fintech firms in the U.S., but it should be noted that the index does not have specific categories of businesses since it is not feasible to categorise businesses related to Fintech firms into a single category. Securities qualified for inclusion in indexes are available to facilitate the provision of financial products and services. The Bloomberg “Relative Valuation” (RV) tool, which can identify alternative match firms based on industry, EPS review, ownership, and credit rating, was used in this study, resulting in the identification of 140 matching samples of non-Fintech firms. As a result, the study identified 48 Fintech and 140 non-Fintech firms. After the exclusion of data with missing values, this study successfully acquired a total of 1,904 (firm-year) yearly observations.

Pearson and Spearman correlations, OLS, quantile regression, and dynamic GMM regression were then performed to examine the hypothesised relationships. All variables were winsorized at 1% and 99% to address the outliers. Besides that, values of Variance Inflation Factor (VIF) were examined after each regression. In this case, the value of VIF must not exceed 5. Meanwhile, quantile regression and dynamic GMM regression were performed to deal with heterogeneity and endogeneity issues, respectively.

3.1 Dependent variable

There are various definitions of Tobin’s Q. According to Bloomberg Inc., Tobin’s Q is obtained after dividing the sum of market capitalisation, total liabilities, preferred equity, and minority interest by total fixed and current assets, which was applied in the current study. The same definition of Tobin’s Q was applied in several prior studies [ 46 , 48 ]. In this study, Tobin’s Q served as a proxy of market performance of a firm ( i ) in the year ( t ). The market performance of Fintech and non-Fintech firms represented the study’s dependent variable.

3.2 Independent variables

H1 involved the relationship between the COVID-19 pandemic period and the market performance of Fintech and non-Fintech firms. In this case, the interaction variable (Fin*COVID) between Fintech dummy variable (“0” for non-Fintech firm and “1” for Fintech firm) and COVID-19 dummy variable (“0” for non-pandemic period and “1” for pandemic period) represented the marginal impact of Fintech firms during the COVID-19 pandemic period (independent variable) [ 56 ].

Meanwhile, H2 focused on the relationship between the market performance of Fintech and non-Fintech firms and their selection of auditor during the COVID-19 pandemic. In this case, the interaction variable of three dummy variables (Fin*COVID*Big4) served as the other independent variable to comprehend how the selection of auditor affects the market performance (i.e., Tobin’s Q) of firms during the pandemic period.

3.3 Firm-level controls

In line with the theory and findings of prior studies, the current study’s regression analysis included firm-level controls. Prior studies demonstrated the significant relationship of leverage, capital expenditure, growth, total equity, and Tobin’s Q [ 46 ]. Thus, the effects of these variables were controlled in this study. The definitions of these firm-level controls are presented in Appendix A.

3.4 Fixed effect control

There is evidence that all firms in the U.S. recorded improved sustainability disclosure scores over time [ 48 ]. Chin et al. (2022) determined the impact of market performance and political connections with the fixed time effect of between 2012 and 2019. The current study focused on the timeframe of between 2010 and 2021. Likewise, unobserved time-variant effects were controlled in this study in the case of time dummy variables.

4 Results and discussion

4.1 descriptive statistics.

Referring to Table 1 , nearly all Fintech and non-Fintech firms (almost 95%) in the study’s sample engaged with a Big Four auditor. This study found high overall variable fluctuation due to the inclusion of outliers. Capital expenditure recorded the highest standard deviation, followed by total equity. The difference in the minimum and maximum values was the highest for capital expenditure and total equity. Based on the positive figures for leverage, capital expenditure, growth, and total equity, these firms were not financially challenged.

4.2 Correlations

Referring to Table 2 , Pearson (lower diagonal) and Spearman (upper italic diagonal) coefficients were tabulated. Based on the obtained results, Tobin’s Q recorded the strongest correlation with total equity at -0.212 ( p  < 0.05), which did not exceed the threshold value of 0.70. Thus, the regression models in this study were deemed free from multicollinearity issues (Dharmasirin et al., 2022).

4.3 Multivariate analyses

Pool OLS regression was specifically considered for this study to minimise estimate bias and multicollinearity issues, deal with the aspect of discrete variability, and identify the relationship between independent and dependent variables over time [ 31 ]. Referring to Table 3 , the first model did not include any control variables and fixed effects. Meanwhile, the second model involved firm-level control variables and excluded time-fixed effects. The final and third model consisted of all control variables and fixed effects.

Based on the results of the third baseline model ( β  =  − 1.104, t  =  − 19.836, α  = 0.05, one-tailed), Fintech firms recorded poorer market performance than non-Fintech firms . Thus, H1 was supported. In other words, non-Fintech firms are valued more than Fintech firms during a pandemic period. Prior studies concluded otherwise—merger and acquisition [ 17 ], governance [ 46 ], manufacturing efficiency [ 14 ], and Environment, Social, and Governance (ESG) disclosure [ 49 ] help Fintech firms to achieve higher economic growth than non-Fintech firms. However, it should be noted that, unlike these prior studies that focused on the pre-pandemic period, the current study examined these firms’ market performance during the COVID-19 pandemic period.

OLS regression model was also used for the testing of H2. Likewise, there were three models, as shown in Table 4 . The first model did not include any control variables and fixed effects, while the second model included firm-level control variables and excluded time-fixed effects. The third model consisted of all control variables and fixed effects.

Based on the results of the third baseline model ( β  = -1.019, t  = -7.410, α  = 0.10, one-tailed), Fintech firms recorded poorer market performance than non-Fintech firms, and CG moderated the influence of the pandemic on these firms’ market performance . Fintech firms with weak CG demonstrate poor market performance during a pandemic period. With that, H2 was adequately supported. In line with the agency theory, investing in CG activities can be a waste of resources following the potential agency issues between the firm managers and shareholders.

4.4 Robustness tests

Quantile regression introduced by Bassett and Koenker [ 3 ], which was reviewed by Buchinsky [ 6 ], Koenker and Hallock [ 33 ], and Koenker and Ng [ 34 ] for broader applications in banking and finance [ 52 ], was specifically considered in this study. The selection was made based on the following reasons: (1 quantile regression addresses the potential heterogeneity issue that may affect the interpretation of the hypothesised relationships,(2 conventional techniques like OLS and autoregressive distributed lag (ARDL regress the mean values of variables, but quantile regression regresses the median values of variables to determine the significance of the hypothesised relationships on several quantiles across the panel series against the single averaged outcomes; (3 quantile regression would elucidate the effects of interaction variables (Fin*COVID and Fin*COVID*Big4 at different levels of market performance, providing a better understanding on the relationship of the selection of auditor and market performance of Fintech firms during a pandemic period.

Accordingly, the considered Bassett and Koenker [ 3 ] quantile regression model is expressed as follows:

where i denotes country; t denotes time; \({y}_{it}\) denotes financial performance; \(\acute{x}_{it}\) is a vector of regressors; \(\beta\) is the vector of parameters to be estimated; \(\varepsilon\) is the vector of residuals; \({Quant}_{\theta }\left({y}_{it}|{x}_{it}\right)\) denotes \({\theta }^{th}\) conditional quantile of \({y}_{it}\) given \({x}_{it}\) .

Meanwhile, \(\theta th\) regression quantile, \(0<\theta <1\) , deals with the following aspect:

where \({\rho }_{\theta }\left(\cdot \right)\) or known as the “check function” is expressed as follows:

Linear programming methods can be used to solve Eq. ( 2 ). The whole conditional distribution of \({P}_{it}\) , conditional on \({x}_{it}\) , can be traced as \(\theta\) increases from 0 to 1 [ 6 ].

The current study’s results of quantile regression, which served to corroborate the results of multivariate analyses for the testing of hypotheses, are presented in Table 5 . In particular, the relationships of Fin*COVID and Fin*COVID*Big4 with market performance (25%, 50%, 75%, and 99%) were evaluated. The obtained results revealed significant negative figures for both cases of Fin*COVID and Fin*COVID*Big4 at all quantiles of market performance (Models 1–8). In addition, Pseudo R 2 ranged from 8.63 to 45.53 for these various regression models at various quantiles. These results indicated unchanged baseline findings at all quantiles of regression models, which further supported H1 and H2.

4.5 Control for endogeneity (System GMM)

The results of the testing of hypotheses in this study were further validated through the application of a variation of the moments technique. Dynamic GMM regression, an extension of the classical theory [ 21 ], was considered in this study. In a random sample, sample statistics are likely to converge to a specific fixed value, which serves as the foundation for the moments technique. For the computation of K statistics, m 1 , …,  m K , K parameters,  θ 1 , …,  θ K , are first estimated. These K statistics presents a probability model that potentially constraints known functions of the parameters. These functions are inverted to describe the parameters as functions of K moments, as K functions are equated. Since events are repeated due to the law of big numbers, asymptotical distribution is necessary.

Assuming that the sample data of the current study consists of  n  observations, y 1 , …,  y n , the  k th order raw moment is defined as follows:

In most cases,  μ k  serves as the resultant outcome based on the underlying data. K raw moments can be calculated to solve K equations for the estimation of K unknown parameters. The power-of- y moments represent an apparent data source of these parameters.

Accordingly, the number of moments equations depends on the number of parameters to be evaluated. However, the acquired single solution to the instant equations would satisfy all equations at that time. In the case of the number of moments equations exceeding the number of parameters, there would be concerns of overdetermination and competing solutions.

Assuming that the current study’s model includes K  parameters,  θ  = ( θ 1 ,  θ 2 , …,  θ K ), and L , the moment with a condition of L  >  K , the population orthogonality supports GMM estimator conditions as follows:

As a result, the corresponding sample means is defined as follows:

No solution is available to solve Eq. ( 7 ) in the case of L equations with K unknown parameters. With that, the number of criterion function is to be reduced to match \(\left(\begin{array}{c}L\\ K\end{array}\right)\) different sets of estimates from Eq. ( 7 ):

Likewise, the weighted sum of squares may serve as a criterion to obtain a reliable estimator of θ as long as W n does not depend on the data. The minimisation of Eq. ( 9 ) defines the estimators θ as either minimal distance or GMM estimators. W n is compatible with the latter when W n is positive-definite matrix.

Table 6 presents the results of GMM regression. As the natural log of total assets of firm i in the year t , firm size served as an instrument variable for the estimates. Prior studies highlighted its positive relationship with the market risk [ 49 ]. With that, the relationship between Fin*COVID and market performance (Model 1) was evaluated in this study. The interaction variable appeared to exhibit marginal effect on firms’ market performance during the pandemic period. Following that, Fin*COVID*Big4 was regressed with market performance in Model 2. Likewise, marginal effect was observed for the case of those firms audited by a Big Four auditor during the pandemic period. It should be noted that firm-level controls and time-fixed effects were considered for the analysis.

The obtained results revealed the significant negative influence of Fin*COVID and Fin*COVID*Big4 on market performance, which corroborated the results presented in Table 3 and Table 4 . The results also reaffirmed the absence of endogeneity issue. Based on these results, it can be concluded that investors have unfavourable perceptions towards Fintech firms audited by a Big Four auditor during the pandemic period.

4.6 Self-selection test

Studies have highlighted “market performance” as an exogenous variable, which can potentially skew the resultant outcomes [ 50 , 58 ]. Therefore, there may be selection bias in the current study, where unobservable attributes of Fintech firms may be systematically different from those of non-FinTech firms. Lennox et al. (2012) recommended a two-step treatment effect model for estimation to address this particular issue, which was applied in this study.

Accordingly, a probit regression was estimated in the first step to identify the probability of selecting a Fintech firm. Equation ( 10 ) presents the selection model (or the first-step model). In the second step, the calculated Inverse Mills Ratio (IMR) in Eq. ( 10 ) was incorporated into the baseline model (Eq.  11 ). In particular, “Big4” was retained for the self-selection test considering that most of the firms in the study’s sample engaged with a Big Four auditor. The definitions of the considered variables are presented in Appendix A.

The IMR results in Table 7 confirmed the absence of self-selection bias in the study’s sample. The resultant outcomes of Eq. ( 11 ) are presented in Table 7 (Model 1). Both Fin and Big4 recorded insignificant negative relationship (-0.198, t  = -1.169, α  = 0.10, one-tailed). Meanwhile, Model 2 and Model 3 demonstrated the main regressions without and with IMR, respectively. Based on the results, the endogenous variable, Fin*COVID*Big4 it , remained statistically significant at 0.01 level (one-tailed) with the inclusion of IMR (Model 3). A significant IMR coefficient indicates the existence of selection bias. As previously shown in Table 6 , endogeneity was controlled, with the inclusion of firm size as the instrument variable.

5 Conclusions

The market performance of Fintech firms and their corporate governance practices in relation to the ESG disclosure and sustainability has remained underexplored [ 49 ], especially during the global COVID-19 pandemic period [ 2 ]. Furthermore, the influence of the selection of auditor on the market performance of firms has recently gained growing attention. The selection of a Big Four auditor or a non-Big Four auditor has become an increasingly crucial aspect for investors in their decision-making during a financial crisis. Addressing that, the current study assessed how the selection of a Big Four auditor can influence Fintech firms’ and non-Fintech firms’ market performance during the COVID-19 pandemic period based on a panel sample of 1,904 firm-year data from 2010 to 2021. In particular, OLS regression, quantile regression, and dynamic GMM regression were performed. These analyses were also considered to deal with the potential heterogeneity and endogeneity issues.

This study identified two key observations: (1) non-Fintech firms recorded stronger market performance than Fintech firms during the COVID-19 pandemic period; (2) Fintech firms audited by a Big Four auditor recorded significantly poorer market performance than Fintech firms and non-Fintech firms audited by a non-Big Four auditor during the COVID-19 pandemic period. In other words, clients of non-Big Four auditors are more likely to achieve better market performance during a financial crisis. The CG policies of Fintech firms appeared to have adversely affected their market performance during the pandemic period. These findings were found comparable across model and method variations.

5.1 Implications and contribution

This study presented several notable implications that may benefit practitioners in the related fields, particularly for the management of Fintech firms. Firstly, firms should prioritise their selection of auditor to ensure the sustainability of their financial system given the significance of CG in ESG disclosure. Secondly, it is necessary to consider parallel reasoning and discourse to comprehend factors that influence a firm’s engagement with a costlier, seemingly more exclusive (Big Four) auditor. However, a Fintech firm may opt for a non-Big Four auditor and divert their capital to other investing activities. Thirdly, firm managers should consider adopting a more robust governance structure when it comes to engaging with a non-Big Four auditor. Fourthly, the quality of ESG disclosure, which is often viewed as the cause of objective variance, should be reviewed and regulated. Finally, as non-Fintech firms have more established operational structure than Fintech firms, the quality of internal audit, as compared to the quality of external audit, is highly crucial for Fintech firms. High-quality internal audit helps Fintech firms to gain investors’ trust. Fintech firm managers should be aware of the adverse effect of engaging with a Big Four auditor on their firm’s market performance. In other words, Fintech firm managers should shift their focus to engage with a non-Big Four auditor when it comes to their external audit.

Accordingly, this study presented three significant theoretical contributions. The Fintech firms play an increasingly crucial role in the financial services sector. However, previous studies only focused on the influence of policy decisions (interest rate) on the equity markets and bank stock returns during financial crises [ 24 , 51 ]. The current study contributed significant empirical evidence on how crisis policy (lockdown) responses can affect Fintech firms’ market performance. Fintech firms clearly have advantages over non-Fintech firms during the recent Coronavirus (COVID-19) pandemic that requires social distancing. The extended analysis of these firms presented valuable insights on their market performance during a global health and financial crisis. This study found that Fintech firms recorded weaker market performance than non-Fintech firms, which was attributed to their sensitivity towards governance policies (e.g., lockdown) by the U.S. government during the pandemic period.

Accordingly, it is recommended for future research to assess the explanatory power of ESG on market performance in different economic sectors. The use of a global sample is also recommended for future research to determine whether the study’s findings are market-variant given the variation of ESG initiatives across jurisdictions. Besides that, the use of a qualitative method (e.g., interview Fintech firm managers) is suggested for a more in-depth understanding of this phenomenon.

5.2 Limitations and recommendations

Despite the significant findings and contributions of this study, several limitations should be acknowledged. Firstly, the use of a U.S. dataset limits the generalizability of the results to other contexts. Different countries have unique regulatory environments and cultural factors that might influence Fintech firms' market performance and their selection of auditors.

Secondly, the study is constrained by its reliance on publicly available data, which might not fully capture all relevant aspects of Fintech firms' corporate governance practices. For example, unobservable factors such as the quality of management or internal business practices might also play a significant role in influencing firm performance during a crisis.

Thirdly, the study assumes that the choice of Big Four versus non-Big Four auditors is a primary determinant of firms' governance performance. While the auditor's reputation and quality can indeed play a role, it might not be the only, or even the most important, factor influencing performance, particularly in crisis periods. Other factors such as firms' financial health, business strategy, and the overall state of the economy might have equally significant impacts.

Despite these limitations, this study provides valuable insights into the market performance of Fintech firms during the COVID-19 pandemic and the influence of auditor choice on this performance. Future research could build on these findings by addressing these limitations and exploring other relevant factors.

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Rising Cyber Threats Pose Serious Concerns for Financial Stability

Cyberattacks have more than doubled since the pandemic. While companies have historically suffered relatively modest direct losses from cyberattacks, some have experienced a much heavier toll. US credit reporting agency Equifax, for example, paid more than $1 billion in penalties after a major data breach in 2017 that affected about 150 million consumers.

As we show in a chapter of the April 2024 Global Financial Stability Report , the risk of extreme losses from cyber incidents is increasing. Such losses could potentially cause funding problems for companies and even jeopardize their solvency. The size of these extreme losses has more than quadrupled since 2017 to $2.5 billion. And indirect losses like reputational damage or security upgrades are substantially higher.

The financial sector is uniquely exposed to cyber risk. Financial firms—given the large amounts of sensitive data and transactions they handle—are often targeted by criminals seeking to steal money or disrupt economic activity. Attacks on financial firms account for nearly one-fifth of the total, of which banks are the most exposed.

Incidents in the financial sector could threaten financial and economic stability if they erode confidence in the financial system, disrupt critical services, or cause spillovers to other institutions.

For example, a severe incident at a financial institution could undermine trust and, in extreme cases, lead to market selloffs or runs on banks. Although no significant “cyber runs” have occurred thus far, our analysis suggests modest and somewhat persistent deposit outflows have occurred at smaller US banks after a cyberattack.

Cyber incidents that disrupt critical services like payment networks could also severely affect economic activity. For example, a December attack at the Central Bank of Lesotho disrupted the national payment system, preventing transactions by domestic banks.

Another consideration is that financial firms increasingly rely on third-party IT service providers, and may do so even more with the emerging role of artificial intelligence. Such external providers can improve operational resilience, but also expose the financial industry to systemwide shocks. For example, a 2023 ransomware attack  on a cloud IT service provider caused simultaneous outages at 60 US credit unions.

With the global financial system facing significant and growing cyber risks from increasing digitalization and geopolitical tensions, as shown in the chapter, policies and governance frameworks at firms must keep pace.

Because private incentives may be insufficient to address cyber risks—for example, firms may not fully account for the systemwide effects of incidents—public intervention may be necessary.

However, according to an IMF survey of central banks and supervisory authorities, cybersecurity policy frameworks, especially in emerging market and developing economies, often remain insufficient. For example, only about half of countries surveyed had a national, financial sector-focused cybersecurity strategy or dedicated cybersecurity regulations.

To strengthen resilience  in the financial sector, authorities should develop an adequate national cybersecurity strategy accompanied by effective regulation and supervisory capacity that should encompass:

• Periodically assessing the cybersecurity landscape and identifying potential systemic risks from interconnectedness and concentrations, including from third-party service providers.
• Encouraging cyber “maturity” among financial sector firms, including board-level access to cybersecurity expertise, as supported by the chapter’s analysis which suggests that better cyber-related governance may reduce cyber risk.
• Improving cyber hygiene of firms—that is, their online security and system health (such as antimalware and multifactor authentication)—and training and awareness.
• Prioritizing data reporting and collection of cyber incidents, and sharing information among financial sector participants to enhance their collective preparedness.

As attacks often emanate from outside a financial firm’s home country and proceeds can be routed across borders, international cooperation is imperative to address cyber risk successfully.

While cyber incidents will occur, the financial sector needs the capacity to deliver critical business services during these disruptions. To this end, financial firms should develop, and test, response and recovery procedures and national authorities should have effective response protocols and crisis management frameworks in place.

The IMF actively helps member countries strengthen their cybersecurity frameworks through policy advice, for example as part of the Financial Sector Assessment Program , and through capacity-building  activities.

—This blog is based on Chapter 3 of the April 2024 Global Financial Stability Report, “Cyber Risk: A Growing Concern for Macrofinancial Stability.”

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Financial Stability Needs Supervisors With the Ability and Will to Act

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The independent source for health policy research, polling, and news.

Americans’ Challenges with Health Care Costs

Lunna Lopes , Alex Montero , Marley Presiado , and Liz Hamel Published: Mar 01, 2024

This issue brief was updated on March 1, 2024 to include the latest KFF polling data. 

For many years, KFF polling has found that the high cost of health care is a burden on U.S. families, and that health care costs factor into decisions about insurance coverage and care seeking. These costs and the prospect of unexpected medical bills also rank as the top financial worries for adults and their families, and recent polling shows that lowering out-of-pocket health care costs is by and large the public’s top health care priority. Health care affordability is also one of the top issues that voters want to hear presidential candidates talk about during the 2024 election. This data note summarizes recent KFF polling on the public’s experiences with health care costs. Main takeaways include:

• About half of U.S. adults say it is difficult to afford health care costs, and one in four say they or a family member in their household had problems paying for health care in the past 12 months. Younger adults, those with lower incomes, adults in fair or poor health, and the uninsured are particularly likely to report problems affording health care in the past year.
• The cost of health care can lead some to put off needed care. One in four adults say that in the past 12 months they have skipped or postponed getting health care they needed because of the cost. Notably six in ten uninsured adults (61%) say they went without needed care because of the cost.
• The cost of prescription drugs prevents some people from filling prescriptions. About one in five adults (21%) say they have not filled a prescription because of the cost while a similar share say they have instead opted for over-the-counter alternatives. About one in ten adults say they have cut pills in half or skipped doses of medicine in the last year because of the cost.
• Those who are covered by health insurance are not immune to the burden of health care costs. About half (48%) of insured adults worry about affording their monthly health insurance premium and large shares of adults with employer-sponsored insurance (ESI) and those with Marketplace coverage rate their insurance as “fair” or “poor” when it comes to their monthly premium and to out-of-pocket costs to see a doctor.
• Health care debt is a burden for a large share of Americans. About four in ten adults (41%) report having debt due to medical or dental bills including debts owed to credit cards, collections agencies, family and friends, banks, and other lenders to pay for their health care costs, with disproportionate shares of Black and Hispanic adults, women, parents, those with low incomes, and uninsured adults saying they have health care debt.
• Notable shares of adults still say they are worried about affording medical costs such as unexpected bills, the cost of health care services (including out-of-pocket costs not covered by insurance, such as co-pays and deductibles), prescription drug costs, and long-term care services for themselves or a family member. About three in four adults say they are either “very” or “somewhat worried” about being able to afford unexpected medical bills (74%) or the cost of health care services (73%) for themselves and their families. Additionally, about half of adults would be unable to pay an unexpected medical bill of $500 in full without going into debt.

Difficulty Affording Medical Costs

Many U.S. adults have trouble affording health care costs. While lower income and uninsured adults are the most likely to report this, those with health insurance and those with higher incomes are not immune to the high cost of medical care. About half of U.S. adults say that it is very or somewhat difficult for them to afford their health care costs (47%). Among those under age 65, uninsured adults are much more likely to say affording health care costs is difficult (85%) compared to those with health insurance coverage (47%). Additionally, at least six in ten Black adults (60%) and Hispanic adults (65%) report difficulty affording health care costs compared to about four in ten White adults (39%). Adults in households with annual incomes under $40,000 are more than three times as likely as adults in households with incomes over $90,000 to say it is difficult to afford their health care costs (69% v. 21%). (Source: KFF Health Care Debt Survey: Feb.-Mar. 2022 )

When asked specifically about problems paying for health care in the past year, one in four adults say they or a family member in their household had problems paying for care, including three in ten adults under age 50 and those with lower household incomes (under $40,000). Affording health care is particularly a problem for those who may need it the most as one-third of adults who describe their physical health as “fair” or “poor” say they or a family member had problems paying for health care in the past 12 months. Among uninsured adults, half (49%) say they or a family member in their household had problems paying for health care, including 51% of uninsured adults who say they are in fair or poor health.

The cost of care can also lead some adults to skip or delay seeking services. One-quarter of adults say that in the past 12 months, they have skipped or postponed getting health care they needed because of the cost. The cost of care can also have disproportionate impacts among different groups of people; for instance, women are more likely than men to say they have skipped or postponed getting health care they needed because of the cost (28% vs. 21%). Adults ages 65 and older, most of whom are eligible for health care coverage through Medicare, are much less likely than younger age groups to say they have not gotten health care they needed because of cost.

One in four immigrant adults (22%) say they have skipped or postponed care in the past year, rising to about a third (36%) among those who are uninsured. Seven in ten (69%) of immigrant adults who skipped or postponed care (15% of all immigrant adults) said they did so due to cost or lack of health coverage. (Source: The 2023 KFF/LA Times Survey of Immigrants: Apr.-June 2023 )

Six in ten uninsured adults (61%) say they have skipped or postponed getting health care they needed due to cost. Health insurance, however, does not offer ironclad protection as one in five adults with insurance (21%) still report not getting health care they needed due to cost.

KFF health polling from March 2022 also looked at the specific types of care adults are most likely to report putting off and found that dental services are the most common type of medical care that people report delaying or skipping, with 35% of adults saying they have put it off in the past year due to cost. This is followed by vision services (25%), visits to a doctor’s offices (24%), mental health care (18%), hospital services (14%), and hearing services, including hearing aids (10%). (Source: KFF Health Tracking Poll: March 2022 )

A 2022 KFF report found that people who already have debt due to medical or dental care are disproportionately likely to put off or skip medical care. Half (51%) of adults currently experiencing debt due to medical or dental bills say in the past year, cost has been a probititor to getting the medical test or treatment that was recommended by a doctor. (Source: KFF Health Care Debt Survey: Feb.-Mar. 2022 )

Prescription Drug Costs

For many U.S. adults, prescription drugs are a component of their routine care. More than one in four (28%) adults say it is either “somewhat” or “very difficult” for them to afford to pay for prescription drugs. Affording prescription drugs is particularly difficult for adults who take four or more prescription medications (37%) and those in households with annual incomes under $40,000 (40%). Black and Hispanic adults are also more likely than White adults to say it is difficult for them to afford to pay for prescription drugs. (Source: KFF Health Tracking Poll: July 2023 )

The high cost of prescription drugs also leads some people to cut back on their medications in various ways. About one in five adults (21%) say in the past 12 months they have not filled a prescription because of the cost. A similar share (21%) say they have taken an over-the-counter drug instead of getting a prescription filled – rising to about one third of Hispanic adults (32%) and more than one in four adults (27%) with annual household incomes under $40,000. About one in ten adults say that in the past 12 months they have cut pills in half or skipped doses of medicine due to cost. (Source: KFF Health Tracking Poll: July 2023 )

Health Insurance Cost Ratings

Overall, most insured adults rate their health insurance as “excellent” or “good” when it comes to the amount they have to pay out-of-pocket for their prescriptions (61%), the amount they have to pay out-of-pocket to see a doctor (53%), and the amount they pay monthly for insurance (54%). However, at least three in ten rate their insurance as “fair” or “poor” on each of these metrics, and affordability ratings vary depending on the type of coverage people have.

Adults who have private insurance through employer-sponsored insurance or Marketplace coverage are more likely than those with Medicare or Medicaid to rate their insurance negatively when it comes to their monthly premium, the amount they have to pay out of pocket to see a doctor, and their prescription co-pays. About one in four adults with Medicare give negative ratings to the amount they have to pay each month for insurance and to their out-of-pocket prescription costs, while about one in five give their insurance a negative rating when it comes to their out-of-pocket costs to see a doctor.

Medicaid enrollees are less likely than those with other coverage types to give their insurance negative ratings on these affordability measures (Medicaid does not charge monthly premiums in most states, and copays for covered services, where applied, are required to be nominal.) (Source: KFF Survey of Consumer Experiences with Health Insurance )

Health Care Debt

In June 2022, KFF released an analysis of the KFF Health Care Debt Survey , a companion report to the investigative journalism project on health care debt conducted by KFF Health News and NPR, Diagnosis Debt . This project found that health care debt is a wide-reaching problem in the United States and that 41% of U.S. adults currently have some type of debt due to medical or dental bills from their own or someone else’s care, including about a quarter of adults (24%) who say they have medical or dental bills that are past due or that they are unable to pay, and one in five (21%) who have bills they are paying off over time directly to a provider. One in six (17%) report debt owed to a bank, collection agency, or other lender from loans taken out to pay for medical or dental bills, while similar shares say they have health care debt from bills they put on a credit card and are paying off over time (17%). One in ten report debt owed to a family member or friend from money they borrowed to pay off medical or dental bills.

While four in ten U.S. adults have some type of health care debt, disproportionate shares of lower income adults, the uninsured, Black and Hispanic adults, women, and parents report current debt due to medical or dental bills.

Vulnerabilities and Worries About Health Care and Long-Term Care Costs

A February 2024 KFF Health Tracking Poll shows unexpected medical bills and the cost of health care services are at the top of the list of people’s financial worries, with about three-quarters of the public – and similar shares of insured adults younger than 65 – saying they are at least somewhat worried about affording unexpected medical bills (74%) or the cost of health care services (73%) for themselves and their families. Just over half (55%) of the public say they are “very” or “somewhat worried” about being able to afford their prescription drug costs, while about half (48%) of insured adults say they are worried about affording their monthly health insurance premium.

Worries about health care costs pervade among a majority of adults regardless of their financial situation . Among adults who report difficulty affording their monthly bills, more than eight in ten say they are worried about the cost of health care services (86%) or unexpected medical bills (83%). Among those who report being just able to afford their bills, about eight in ten say they are worried about being able to afford unexpected medical bills (84%) or health care services (83%). And even among adults who say they can afford their bills with money left over, six in ten nonetheless say they are “very” or “somewhat worried” about being able to afford unexpected medical bills (62%) or the cost of health care services (60%) for themselves and their family. (Source: KFF Health Tracking Poll: February 2024 )

Many U.S. adults may be one unexpected medical bill from falling into debt. About half of U.S. adults say they would not be able to pay an unexpected medical bill that came to $500 out of pocket. This includes one in five (19%) who would not be able to pay it at all, 5% who would borrow the money from a bank, payday lender, friends or family to cover the cost, and one in five (21%) who would incur credit card debt in order to pay the bill. Women, those with lower household incomes, Black and Hispanic adults are more likely than their counterparts to say they would be unable to afford this type of bill. (Source: KFF Health Care Debt Survey: Feb.-Mar. 2022 )

Among older adults, the costs of long-term care and support services are also a concern. Almost six in ten (57%) adults 65 and older say they are at least “somewhat anxious” about affording the cost of a nursing home or assisted living facility if they needed it, and half say they feel anxious about being able to afford support services such as paid nurses or aides. These concerns also loom large among those between the ages of 50 and 64, with more than seven in ten saying they feel anxious about affording residential care (73%) and care from paid nurses or aides (72%) if they were to need these services. See The Affordability of Long-Term Care and Support Services: Findings from a KFF Survey for a deeper dive into concerns about the affordability of nursing homes and support services.

• Health Costs
• Racial Equity and Health Policy
• Private Insurance
• Affordability
• High Deductible Plans
• Tracking Poll

Also of Interest

• Health Care Debt In The U.S.: The Broad Consequences Of Medical And Dental Bills
• KFF Health Tracking Poll – March 2022: Economic Concerns and Health Policy, The ACA, and Views of Long-term Care Facilities
• KFF’s Kaiser Health News and NPR Launch Diagnosis: Debt, a Yearlong Reporting Partnership Exploring the Scale, Impact, and Causes of the Health Care Debt Crisis in America
• How Financially Vulnerable are People with Medical Debt?

UK Survey Shows Signs of Cost of Living Crisis Easing for Some

FILE PHOTO: A customer carries a basket filled with food inside a Sainsbury?s supermarket in Richmond, West London, Britain February 21, 2024. REUTERS/Isabel Infantes/File Photo

By Huw Jones

LONDON (Reuters) - Britain's cost of living crisis is showing signs of easing, an FCA survey showed on Wednesday, with a year-on-year fall in the number of people struggling to pay bills and credit repayments in January and a rise in those coping well or very well.

The Financial Conduct Authority's latest financial lives survey estimated that 7.4 million Britons were struggling to pay bills and credit repayments, from 10.9 million in January 2023.

The figure is still higher than 5.8 million in February 2020, before the beginning of Britain's cost of living crisis, which was fuelled by high inflation and energy prices.

This squeeze prompted the financial watchdog to require banks to offer customers payment holidays and other help.

"Our research shows many people are still struggling with their bills, though it is encouraging to see some benefitting from the help that's available," said Sheldon Mills, FCA executive director of consumers and competition.

The survey showed that 72% of adults were coping fairly well or very well, up from 64% in January 2023.

January's figures are worse than FCA historic data, with utility and credit card payments most commonly missed, prompting people to cut back on insurance, skip meals out and holidays.

Renters, single adults with children and the unemployed were among the hardest hit, as well as those living in the North of England and in the most deprived areas of Britain, the impact hitting some people's mental health, the FCA said.

Cost of living pressures should ease further this year as inflation is expected to drop below the Bank of England's 2% target in coming months, raising hopes it will begin cutting interest rates, which currently stand at 5.25%.

Interest rates were raised by the central bank from a record low of nearly zero percent to combat inflation.

Wages are also rising at a faster pace than inflation, putting more cash in people's pockets in real terms while energy prices stabilise.

(Reporting by Huw Jones; Editing by Alexander Smith)

Copyright 2024 Thomson Reuters .

Tags: United Kingdom , Europe , financial regulation

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• COVID-19 and your mental health

Worries and anxiety about COVID-19 can be overwhelming. Learn ways to cope as COVID-19 spreads.

At the start of the COVID-19 pandemic, life for many people changed very quickly. Worry and concern were natural partners of all that change — getting used to new routines, loneliness and financial pressure, among other issues. Information overload, rumor and misinformation didn't help.

Worldwide surveys done in 2020 and 2021 found higher than typical levels of stress, insomnia, anxiety and depression. By 2022, levels had lowered but were still higher than before 2020.

Though feelings of distress about COVID-19 may come and go, they are still an issue for many people. You aren't alone if you feel distress due to COVID-19. And you're not alone if you've coped with the stress in less than healthy ways, such as substance use.

But healthier self-care choices can help you cope with COVID-19 or any other challenge you may face.

And knowing when to get help can be the most essential self-care action of all.

Recognize what's typical and what's not

Stress and worry are common during a crisis. But something like the COVID-19 pandemic can push people beyond their ability to cope.

In surveys, the most common symptoms reported were trouble sleeping and feeling anxiety or nervous. The number of people noting those symptoms went up and down in surveys given over time. Depression and loneliness were less common than nervousness or sleep problems, but more consistent across surveys given over time. Among adults, use of drugs, alcohol and other intoxicating substances has increased over time as well.

The first step is to notice how often you feel helpless, sad, angry, irritable, hopeless, anxious or afraid. Some people may feel numb.

Keep track of how often you have trouble focusing on daily tasks or doing routine chores. Are there things that you used to enjoy doing that you stopped doing because of how you feel? Note any big changes in appetite, any substance use, body aches and pains, and problems with sleep.

These feelings may come and go over time. But if these feelings don't go away or make it hard to do your daily tasks, it's time to ask for help.

Get help when you need it

If you're feeling suicidal or thinking of hurting yourself, seek help.

• Contact your healthcare professional or a mental health professional.
• Contact a suicide hotline. In the U.S., call or text 988 to reach the 988 Suicide & Crisis Lifeline , available 24 hours a day, seven days a week. Or use the Lifeline Chat . Services are free and confidential.

If you are worried about yourself or someone else, contact your healthcare professional or mental health professional. Some may be able to see you in person or talk over the phone or online.

You also can reach out to a friend or loved one. Someone in your faith community also could help.

And you may be able to get counseling or a mental health appointment through an employer's employee assistance program.

Another option is information and treatment options from groups such as:

• National Alliance on Mental Illness (NAMI).
• Substance Abuse and Mental Health Services Administration (SAMHSA).
• Anxiety and Depression Association of America.

Self-care tips

Some people may use unhealthy ways to cope with anxiety around COVID-19. These unhealthy choices may include things such as misuse of medicines or legal drugs and use of illegal drugs. Unhealthy coping choices also can be things such as sleeping too much or too little, or overeating. It also can include avoiding other people and focusing on only one soothing thing, such as work, television or gaming.

Unhealthy coping methods can worsen mental and physical health. And that is particularly true if you're trying to manage or recover from COVID-19.

Self-care actions can help you restore a healthy balance in your life. They can lessen everyday stress or significant anxiety linked to events such as the COVID-19 pandemic. Self-care actions give your body and mind a chance to heal from the problems long-term stress can cause.

Take care of your body

Healthy self-care tips start with the basics. Give your body what it needs and avoid what it doesn't need. Some tips are:

• Get the right amount of sleep for you. A regular sleep schedule, when you go to bed and get up at similar times each day, can help avoid sleep problems.
• Move your body. Regular physical activity and exercise can help reduce anxiety and improve mood. Any activity you can do regularly is a good choice. That may be a scheduled workout, a walk or even dancing to your favorite music.
• Choose healthy food and drinks. Foods that are high in nutrients, such as protein, vitamins and minerals are healthy choices. Avoid food or drink with added sugar, fat or salt.
• Avoid tobacco, alcohol and drugs. If you smoke tobacco or if you vape, you're already at higher risk of lung disease. Because COVID-19 affects the lungs, your risk increases even more. Using alcohol to manage how you feel can make matters worse and reduce your coping skills. Avoid taking illegal drugs or misusing prescriptions to manage your feelings.

Take care of your mind

Healthy coping actions for your brain start with deciding how much news and social media is right for you. Staying informed, especially during a pandemic, helps you make the best choices but do it carefully.

Set aside a specific amount of time to find information in the news or on social media, stay limited to that time, and choose reliable sources. For example, give yourself up to 20 or 30 minutes a day of news and social media. That amount keeps people informed but not overwhelmed.

For COVID-19, consider reliable health sources. Examples are the U.S. Centers for Disease Control and Prevention (CDC) and the World Health Organization (WHO).

Other healthy self-care tips are:

• Relax and recharge. Many people benefit from relaxation exercises such as mindfulness, deep breathing, meditation and yoga. Find an activity that helps you relax and try to do it every day at least for a short time. Fitting time in for hobbies or activities you enjoy can help manage feelings of stress too.
• Stick to your health routine. If you see a healthcare professional for mental health services, keep up with your appointments. And stay up to date with all your wellness tests and screenings.
• Stay in touch and connect with others. Family, friends and your community are part of a healthy mental outlook. Together, you form a healthy support network for concerns or challenges. Social interactions, over time, are linked to a healthier and longer life.

Avoid stigma and discrimination

Stigma can make people feel isolated and even abandoned. They may feel sad, hurt and angry when people in their community avoid them for fear of getting COVID-19. People who have experienced stigma related to COVID-19 include people of Asian descent, health care workers and people with COVID-19.

Treating people differently because of their medical condition, called medical discrimination, isn't new to the COVID-19 pandemic. Stigma has long been a problem for people with various conditions such as Hansen's disease (leprosy), HIV, diabetes and many mental illnesses.

People who experience stigma may be left out or shunned, treated differently, or denied job and school options. They also may be targets of verbal, emotional and physical abuse.

Communication can help end stigma or discrimination. You can address stigma when you:

• Get to know people as more than just an illness. Using respectful language can go a long way toward making people comfortable talking about a health issue.
• Get the facts about COVID-19 or other medical issues from reputable sources such as the CDC and WHO.
• Speak up if you hear or see myths about an illness or people with an illness.

COVID-19 and health

The virus that causes COVID-19 is still a concern for many people. By recognizing when to get help and taking time for your health, life challenges such as COVID-19 can be managed.

• Mental health during the COVID-19 pandemic. National Institutes of Health. https://covid19.nih.gov/covid-19-topics/mental-health. Accessed March 12, 2024.
• Mental Health and COVID-19: Early evidence of the pandemic's impact: Scientific brief, 2 March 2022. World Health Organization. https://www.who.int/publications/i/item/WHO-2019-nCoV-Sci_Brief-Mental_health-2022.1. Accessed March 12, 2024.
• Mental health and the pandemic: What U.S. surveys have found. Pew Research Center. https://www.pewresearch.org/short-reads/2023/03/02/mental-health-and-the-pandemic-what-u-s-surveys-have-found/. Accessed March 12, 2024.
• Taking care of your emotional health. Centers for Disease Control and Prevention. https://emergency.cdc.gov/coping/selfcare.asp. Accessed March 12, 2024.
• #HealthyAtHome—Mental health. World Health Organization. www.who.int/campaigns/connecting-the-world-to-combat-coronavirus/healthyathome/healthyathome---mental-health. Accessed March 12, 2024.
• Coping with stress. Centers for Disease Control and Prevention. www.cdc.gov/mentalhealth/stress-coping/cope-with-stress/. Accessed March 12, 2024.
• Manage stress. U.S. Department of Health and Human Services. https://health.gov/myhealthfinder/topics/health-conditions/heart-health/manage-stress. Accessed March 20, 2020.
• COVID-19 and substance abuse. National Institute on Drug Abuse. https://nida.nih.gov/research-topics/covid-19-substance-use#health-outcomes. Accessed March 12, 2024.
• COVID-19 resource and information guide. National Alliance on Mental Illness. https://www.nami.org/Support-Education/NAMI-HelpLine/COVID-19-Information-and-Resources/COVID-19-Resource-and-Information-Guide. Accessed March 15, 2024.
• Negative coping and PTSD. U.S. Department of Veterans Affairs. https://www.ptsd.va.gov/gethelp/negative_coping.asp. Accessed March 15, 2024.
• Health effects of cigarette smoking. Centers for Disease Control and Prevention. https://www.cdc.gov/tobacco/data_statistics/fact_sheets/health_effects/effects_cig_smoking/index.htm#respiratory. Accessed March 15, 2024.
• People with certain medical conditions. Centers for Disease Control and Prevention. https://www.cdc.gov/coronavirus/2019-ncov/need-extra-precautions/people-with-medical-conditions.html. Accessed March 15, 2024.
• Your healthiest self: Emotional wellness toolkit. National Institutes of Health. https://www.nih.gov/health-information/emotional-wellness-toolkit. Accessed March 15, 2024.
• World leprosy day: Bust the myths, learn the facts. Centers for Disease Control and Prevention. https://www.cdc.gov/leprosy/world-leprosy-day/. Accessed March 15, 2024.
• HIV stigma and discrimination. Centers for Disease Control and Prevention. https://www.cdc.gov/hiv/basics/hiv-stigma/. Accessed March 15, 2024.
• Diabetes stigma: Learn about it, recognize it, reduce it. Centers for Disease Control and Prevention. https://www.cdc.gov/diabetes/library/features/diabetes_stigma.html. Accessed March 15, 2024.
• Phelan SM, et al. Patient and health care professional perspectives on stigma in integrated behavioral health: Barriers and recommendations. Annals of Family Medicine. 2023; doi:10.1370/afm.2924.
• Stigma reduction. Centers for Disease Control and Prevention. https://www.cdc.gov/drugoverdose/od2a/case-studies/stigma-reduction.html. Accessed March 15, 2024.
• Nyblade L, et al. Stigma in health facilities: Why it matters and how we can change it. BMC Medicine. 2019; doi:10.1186/s12916-019-1256-2.
• Combating bias and stigma related to COVID-19. American Psychological Association. https://www.apa.org/topics/covid-19-bias. Accessed March 15, 2024.
• Yashadhana A, et al. Pandemic-related racial discrimination and its health impact among non-Indigenous racially minoritized peoples in high-income contexts: A systematic review. Health Promotion International. 2021; doi:10.1093/heapro/daab144.
• Sawchuk CN (expert opinion). Mayo Clinic. March 25, 2024.

Products and Services

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• Long-term effects of COVID-19
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• COVID-19 in babies and children
• Coronavirus infection by race
• COVID-19 travel advice
• COVID-19 vaccine: Should I reschedule my mammogram?
• COVID-19 vaccines for kids: What you need to know
• COVID-19 vaccines
• COVID-19 variant
• COVID-19 vs. flu: Similarities and differences
• COVID-19: Who's at higher risk of serious symptoms?
• Debunking coronavirus myths
• Different COVID-19 vaccines
• Extracorporeal membrane oxygenation (ECMO)
• Fever: First aid
• Fever treatment: Quick guide to treating a fever
• Fight coronavirus (COVID-19) transmission at home
• Honey: An effective cough remedy?
• How do COVID-19 antibody tests differ from diagnostic tests?
• How to take your pulse
• How to measure your respiratory rate
• How to take your temperature
• How well do face masks protect against COVID-19?
• Is hydroxychloroquine a treatment for COVID-19?
• Loss of smell
• Mayo Clinic Minute: You're washing your hands all wrong
• Mayo Clinic Minute: How dirty are common surfaces?
• Multisystem inflammatory syndrome in children (MIS-C)
• Nausea and vomiting
• Pregnancy and COVID-19
• Safe outdoor activities during the COVID-19 pandemic
• Safety tips for attending school during COVID-19
• Sex and COVID-19
• Shortness of breath
• Thermometers: Understand the options
• Treating COVID-19 at home
• Unusual symptoms of coronavirus
• Vaccine guidance from Mayo Clinic
• Watery eyes

Related information

• Mental health: What's normal, what's not - Related information Mental health: What's normal, what's not
• Mental illness - Related information Mental illness

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Algernon Pharmaceuticals CEO Christopher J. Moreau to Be Featured on Radius Research's Pitch, Deep Dive and Q&A Webinar on April 16th, 2024

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VANCOUVER, British Columbia, April 11, 2024 (GLOBE NEWSWIRE) — Algernon Pharmaceuticals Inc. (the “Company” or “Algernon”) (CSE: AGN) (FRANKFURT: AGW0) (OTCQB: AGNPF), is pleased to invite investors and other interested parties to participate in an upcoming special CEO interview and Q & A session on April 16 th , 2024, at 4 PM ET / 1 PM PT, hosted by Market Radius Research.

Algernon Pharmaceuticals CEO Christopher J. Moreau to Be Featured on Radius Research's Pitch, Deep Dive and Q&A Webinar on April 16th, 2024 Back to video

Martin Gagel of Market Radius Research and CEO Christopher J. Moreau will discuss the recent Ifendprodil transaction with Seyltx and the plans and milestones in store for Algernon’s DMT stroke research program in 2024 and beyond.

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The webinar will be a live, interactive online event where attendees are invited to ask the CEO questions in real-time, following the interview. An archived webcast will be made available for those who cannot join the event live on the day of the webinar.

Event: Radius Research Pitch, Deep Dive, and Q&A with Algernon Pharmaceuticals (AGN) Presentation Date & Time: Tuesday, April 16th at 4 PM ET / 1 PM PT Webcast Registration Link:

https://us02web.zoom.us/webinar/register/2417121683894/WN_Jsop9LZ1QgmLjaiRfjcqgQ

About Market Radius Research

Market Radius Research gives individual investors access to in-depth CEO interviews with deep-dive institutional level discussion and Q&A. Market Radius is hosted by Martin Gagel, former top-ranked technology analyst. By registering for this webinar, you agree to receive email communications from Market Radius Capital, Inc. and from the presenting company (with unsubscribe). Your email will not be further shared. Martin Gagel and Market Radius Capital, Inc. are not registered or licensed to provide investment advice and may own shares in mentioned companies and may be compensated for these services. Content is for information purposes only and is not advice or recommendations and may include incomplete or incorrect information. Investing entails a high degree of risk. This is a production of Market Radius Capital, Inc.

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About Algernon Pharmaceuticals Inc. 

Algernon Pharmaceuticals is a Canadian clinical stage drug development company investigating multiple drugs for unmet global medical needs. Algernon Pharmaceuticals is the parent company of a private subsidiary called Algernon NeuroScience, that is advancing a psychedelic program investigating a proprietary form of DMT for stroke and traumatic brain injury and has an active research program for chronic kidney disease.

Algernon recently announced that it closed on its agreement with Seyltx Inc., a privately owned U.S. based drug development company, for the acquisition of Algernon’s NP-120 (Ifenprodil) research program for the purchase price of USD $2M cash and a 20% common share equity position in Seyltx.

CONTACT INFORMATION

Christopher J. Moreau CEO Algernon Pharmaceuticals Inc. 604.398.4175 ext 701 [email protected] [email protected] www.algernonpharmaceuticals.com

Neither the Canadian Securities Exchange nor its Market Regulator (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.

CAUTIONARY DISCLAIMER STATEMENT: No Securities Exchange has reviewed nor accepts responsibility for the adequacy or accuracy of the content of this news release. This news release contains forward-looking statements relating to product development, licensing, commercialization and regulatory compliance issues and other statements that are not historical facts. Forward-looking statements are often identified by terms such as “will”, “may”, “should”, “anticipate”, “expects” and similar expressions. All statements other than statements of historical fact, included in this release are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company’s expectations include the failure to satisfy the conditions of the relevant securities exchange(s) and other risks detailed from time to time in the filings made by the Company with securities regulations. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and the Company will update or revise publicly any of the included forward-looking statements as expressly required by applicable law.

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