Why did the UK and US experience the Great Financial Crisis so differently?

A new analysis of how the global financial crisis impacted on workers in the UK and United States has been completed by Alex Clymo, who joined the Department of Economics this term.

  • Date

    Mon 6 Nov 17

Alex Clymo

Alex received his PhD from the London School of Economics in 2015 before heading to the University of Amsterdam for a Postdoctoral fellowship.

He has a particular interest in how financial crises affect the wider economy, especially how it affects jobs. This year, he'll be teaching our students for the macroeconomics section of the module Introduction to Economics and our Monetary Economics post-graduate module.  

He argues in his new paper that the Great Financial Crisis had very different implications for workers in the US and the UK. He shows wages and productivity fell in the UK, whilst in the US unemployment and labour force participation were worst affected. This implies very different costs of the crisis on both sides of the Atlantic to real people and businesses, and may also imply that the appropriate policy response would differ across these two regions.

Alex argues these patterns were linked to differences in inflation between the US and UK, which meant that businesses found keeping workers much less costly in the UK than in the US. In a model combining a range of different economic effects he explains how two seemingly similar economies could react so differently. This, in turn, has important implications for policy- makers and whether they should follow or diverge from the policy reactions of our partners abroad.