Results and Finding

Chapter Four: Results and Finding

Introduction

            A financial crisis is when the economy exhibits abnormal behavior. In this instance, there is a confluence of low GDP growth, high unemployment, and growing inflation. Moreover, there are four primary categories of financial crises. From 1929 to 1933, the first financial crisis was felt. It quickly spread panic to other nations after becoming well known on a global scale. The Great Recession was the second financial catastrophe to jolt the world economy and society. The sub-prime mortgage market in the USA was experiencing a severe crisis. Beginning in 2007, it quickly turned into a global banking crisis. Officially, in the USA it lasted until 2012 and contributed to the European debt crises. The worldwide economic environment in the years before a crisis is very important. In the years 2002-2007, the developing world recorded high rates of growth and increased investments and exports (Gertler, & Gilchrist, 2018). In advanced economies, there was external finance fed a consumption boom, which could explode at any time. In most countries, employment was increased, but there were seen imbalances in regional and global labor markets, while globally real wages had almost no improvement.

However, politicians and banks seemed to have turned their noses up at the lessons learned from The Great Depression of the 1930s, thinking they were too smart to let anything like this happen again, which came to surface at the end of 2007-2009, was stated to be the longest recession since the great depression in the 1930’s. It was clear that the recession would not be whispering by as easily as a summer breeze, but as the collapse on the major financial markets, were the threatened caused of the very formation of the global world economy. Throughout the last two centuries, there were two financial crises that jolted the world economy and society (Gertler & Gilchrist, 2018). The first is the Great Recession, which began at the start of the twenty-first century, and the second is the Great Depression, which occurred in the early decades of the twentieth century. The Covid-19 crisis is currently responsible for significant financial instability and economic downturns.

The objective of this study was to analyze the relationships and impact of COVID-19 and the 2007 recession. Additionally, it determined the measures put in place to handle the situations. Economic, social, and political effects are also part of this research because they are some of the main controllers of most world issues. The researcher sought to look into the impact of the Covid-19 pandemic and the 2007 financial recession which negatively impacted the world’s economy during the years that followed. The current mixed method study was aimed at looking at different economic drivers which include government policy, interest rates, unemployment and inflation and how they were significant during this period.

To this end, the researcher developed the following research questions and subquestions to help in looking at the impact, differences and similarities of the Covid-19 pandemic and the 2007 financial recession.

RQ1: What were the factors that were either similar or different and have negatively impacted the wellness of the economies of nations and the survival of businesses.:

SQ1: What were the main economic issues identified between the 2007/2008 economic crisis and the COVID-19 crisis?

SQ2: What steps were involved in alleviating the crisis witnessed with COVID-19 and the economic crisis?

SQ3:  What lessons can be drawn in the future methods of addressing crisis across countries?

The current chapter outlined the steps taken for gathering and analyzing the data, as well as the exact research protocol that was used. The chapter will then go into great depth about the survey respondents, including any pertinent study-related demographic information. The justification for the approach used in the study will then be discussed, along with the data that was acquired in various formats, such as tables and graphs. The study’s findings, together with significant quotes from the participants, will be provided after these preliminary findings. Finally, this chapter will be summarized before moving on to Chapter 5, where the researcher will talk about the findings and implications of this study.

Population and sample

The general population of this study consisted of participants that were affected by both the Covid-19 pandemic and the great recession of 2007. The target population consisted of employees and US citizens that affected by both the crisis in 2019 and 2017.  Both the purposive sampling and random sampling were used in selecting participants in the study. Purposive sampling was used to collect qualitative data whereby knowledgeable participants were recruited. For the qualitative data, random sampling was deployed after which analysis through a mathematical formula was established. This was done to ensure that the required groups were involved in data collection. However, they were all selected from the general population but incorporated expertise to select a sample most useful to drive forward the research. A total of 334 were collected which represented 83.5% of participants. From the samples collected gender distribution was as follows, male participants were 209 while female participants were 125. The researcher ensured that the research participants were experienced and were willing to provide insights into the financial and the health crisis that occurred in 2007 and 2019. Since the research objective of the study was to find the similarities, differences between the great recession of 2007 and the Covid-19 pandemic and the impact of the Covid-19 on the economy, the study ensured that the target population was made up of individuals who experienced both the Great recession and the Covid-19 pandemic.  To ensure that the sample population was made up of the right research participants the researcher developed a selection criterion for choosing the research participants:

  1. Must be over the age of 18 years old.
  2. Must be willing to discuss strategies, barriers, and facilitators for the economy during a crisis such as the Covid-19 pandemic and the 2007 recession.
  3. Must have experienced the 2007 great recession and the Covid-19 pandemic and be willing to look into the two crises and highlight their differences and similarities.
  4. Must be willing to answer the research survey and highlight the issues that affect the economy during a financial crisis and how its effects in length.

The researcher contacted individuals who responded and met the criterion for inclusion, asking them to sign and send back the informed consent form. The researcher contacted the participant to submit the study survey after receiving the informed consent documents from the participant. The research survey questions were provided to the study participants through email for completion. The participants’ claimed experience levels, which ranged from three years to more than twenty years, gave the study a high degree of transferability.

Methodology

To gather evidence, mixed methods comprising of both qualitative and quantitative techniques were deployed. In a mixed method research study, the researcher gathers both the qualitative and quantitative data at the same time and analyzes each data separately, drawing conclusion that relate to the research phenomena (Clark & Cresswell, 2017). These are the best methods for this kind of research as they involve gathering evidence from actual participants. The qualitative approach explores the existence of the indicated information while the quantitative technique quantifies the collected evidence through numerical values.  Therefore, the results and finding will consider both the Quantitative and qualitative data.  For the qualitative research, the researcher utilized a correlational study design where relationships between the variables were identified and the outcomes based on likely outcomes between the variables. The current study identified study variables related to the study which included government policy, interest rates, unemployment and inflation and how they were significant during this period. Graphs, tables, and other forms of data display will be used throughout the chapter. It will concentrate on the key area that makes an effort to address the research questions. The great recession of 2007 and the influence of COVID-19 on the global economy were assessed using a variety of variables in the current study. The researcher divided the factors into three categories: dependent variables, which included the economy, mediating variables, which included government policies, and independent variables, which included interest rates, unemployment, and inflation. The conditions that gave rise to the different crises examined in the current study were described through quantitative research using numerical data and mathematical analysis. A quantitative research design was appropriate to examine the impact of the Covid-19 pandemic and make comparisons with the great recession of 2007, given that the current study sought to identify the similarities and differences between the great recession of 2007 and the Covid-19 pandemic as well as the impact of the Covid-19 on the economy. When objectivity and effectiveness are priorities, a quantitative approach to the research is suitable. A survey instrument was used in the current research design to collect data.

Data Presentation

The Chi-Squared tests

The distribution of categorial variables in the sample population for the 2007 financial recession needed to be compared with the distribution of the categorical variables of the COVID 19.  The comparison of the causal effects was done for the response variables; Interest rate, inflation and unemployment. For instance, the effect of COVID 19 in this instance can be compared with the impact of the2007 financial recession. The objective was to investigate whether the distribution of the survey respondents for each of the two phenomena differed. The null hypothesis used was that there is no difference between the two distributions.

Procedure of carrying out the chi-squared test

For each observed number (O), an expected number (E) is calculated. Since E and O are to be the proportionally same in the COVID -19 response impacts as in the responses of the 2007 financia recession as per the null hypothesis, a parallel table is obtained in which the proportions are exactly similar for both the phenomena. See table 2

Table 2: Distribution by impact on a scale of 1 -5 to economy (or other macroeconomic variables such as inflation, unemployment and interest rate) of respondents to the 2007 recession and COVID 19
Respondents 2007 recession COVID – 19 Proportion
1 1 5
2 2 9
3 3 10
… 4 20
334 5 290

 

Descriptive Statistics

The study reviewed respondents that had experience with both the 2007 financial recession and the COVID – 19 pandemic at 98.2% and had more males than females (67.4% vs 32.6%) with the age brackets of 18 – 84 years. The modal age bracket being 45 – 54 years (31.4%) of the total population. Most of the people surveyed were employees (49.4%) with managers comprising 23.7% of the interviewed population. The modal gross income range for the surveyed respondents lied between $60000 and $79999 per year.

In comparison, the descriptive statistics reveal that the COVID 19 is believed to have had the most impact on the economy than the 2007 financial recession (98.5% v 86.8% on extreme scale of 5 respectively. Furthermore, on a scale of 1 to 5, most of the respondents surveyed revealed that they were more impacted by COVID (having those agreeing that they were severely impacted noting levels of at least 3 on a scale of 1 -5). In contrast, the 2007 financial recession was seen to have had a less severe impact with some respondents noting that they were hardly affected economically with the 2007 financial recession (

Table 1 comprehensively depicts all the descriptive statistics.

Table 1 : Descriptive Statistics

 

Descriptive Statistics
Variable Level Counts Total Proportion P
Gender Female 109 334 0.326 < .001
Male 225 334 0.674 < .001
Age Bracket 18-24 9 334 0.027 < .001
25-34 37 334 0.111 < .001
35-44 93 334 0.278 < .001
45-54 105 334 0.314 < .001
55-64 74 334 0.222 < .001
65-74 15 334 0.045 < .001
75-84 1 334 0.003 < .001
Work Position Employee 165 334 0.494 0.870
Manager 79 334 0.237 < .001
Others(Specify) 32 334 0.096 < .001
Unemployed 58 334 0.174 < .001
Role in the organization Accountant 3 317 0.009 < .001
Analyst 11 317 0.035 < .001
Director 8 317 0.025 < .001
Employee 131 317 0.413 0.002
Lawyer 1 317 0.003 < .001
Lawyer 2 317 0.006 < .001
Manager 38 317 0.120 < .001
Others(Specify) 31 317 0.098 < .001
Specialist 5 317 0.016 < .001
Student 1 317 0.003 < .001
Supervisor 14 317 0.044 < .001
Team lead 15 317 0.047 < .001
Unemployed 57 317 0.180 < .001
Gross Annual Income $20,000 to $39,999 10 334 0.030 < .001
$40,000 to $59,999 33 334 0.099 < .001
$60,000 to $79,999 97 334 0.290 < .001
$80,000 to $99,999 79 334 0.237 < .001
Above $100,000 54 334 0.162 < .001
Less than $19,999 61 334 0.183 < .001
Experienced both COVID-19 and 2007 Recession No 6 334 0.018 < .001
Yes 328 334 0.982 < .001
Level of impact of 2007 recession on the economy on a scale of 1 to 5 3 5 334 0.015 < .001  

 
5 329 334 0.985 < .001
Impact of 2007 recession on individual job and ability to borrow on a scale of 1 to 5 1 5 334 0.015 < .001
2 9 334 0.027 < .001
3 10 334 0.030 < .001
4 20 334 0.060 < .001
5 290 334 0.868 < .001
COVID-19 impact on individual job and ability to borrow on a scale of 1 to 5 2 9 334 0.027 < .001
3 24 334 0.072 < .001
4 33 334 0.099 < .001
5 268 334 0.802 < .001
2007 recession impact on inflation 2 2 334 0.006 < .001
3 20 334 0.060 < .001
4 56 334 0.168 < .001
5 256 334 0.766 < .001
2007 recession impact on unemployment 1 1 334 0.003 < .001
2 5 334 0.015 < .001
3 18 334 0.054 < .001
4 41 334 0.123 < .001
5 269 334 0.805 < .001
2007 recession impact on Interest rate 3 11 334 0.033 < .001
4 71 334 0.213 < .001
5 252 334 0.754 < .001
COVID-19 impact on Inflation 3 13 334 0.039 < .001
4 58 334 0.174 < .001
5 263 334 0.787 < .001
COVID-19 impact on unemployment 1 58 334 0.174 < .001
2 89 334 0.266 < .001
3 58 334 0.174 < .001
4 36 334 0.108 < .001
5 93 334 0.278 < .001
COVID-19 impact on interest rate 1 83 334 0.249 < .001
2 132 334 0.395 < .001
3 97 334 0.290 < .001
4 14 334 0.042 < .001
5 8 334 0.024 < .001
Similarity of the two on Inflation 2 21 334 0.063 < .001
3 49 334 0.147 < .001
4 107 334 0.320 < .001
5 157 334 0.470 0.299
Similarity of two on Unemployment 1 67 334 0.201 < .001
2 44 334 0.132 < .001
3 68 334 0.204 < .001
4 101 334 0.302 < .001
5 54 334 0.162 < .001
Similarity of the two on interest rate 1 35 334 0.105 < .001
2 57 334 0.171 < .001
3 62 334 0.186 < .001
4 103 334 0.308 < .001
5 77 334 0.231 < .001
Was there a possible solution to the impacts of both No 131 334 0.392 < .001
Yes 203 334 0.608 < .001
Note.  Proportions tested against value: 0.5.

 

The study collected data from 334 employees who had experience working from different sectors who had experience of the 2007 recession and the Covid-19 pandemic. The following section will provide an overview of the distribution of age in terms of gender age and the participants’ responses based on the analysis done.

Likert Plots

Gender

The majority of the participants of the participants were male making up 67% of the total participants; females were 33% of the participants.

Age Bracket

In terms of the age bracket, the majority of the participants were between the ages of 45-54 who were interviewed in the current study. These participants were 30+ years during the 2007 hence their contribution to the research was enormous. All the participants were working during the two epidemics hence they felt the effects of the two crises.

Work Position

As earlier indicated all the participants were working at different levels during the pandemics, the majority of the participants were regular employees while 27% were working at managerial. The insights of both the two groups of employees were immense for the current study, the employees offered insights into the financial impact of the 2007 recession and the Covid-19 impact on a personal level and on employment basis in terms of how hard or easy it was to get employed during these times. The managers offered insights into the financial situation at an organization level, and how businesses were during the time noting that businesses were forced to shut down due to the effects of the pandemic. One of the impacts of the Covid-19 was closure of businesses due to the guidelines that looked to minimize the interaction and spread of the deadly virus. Many businesses were forced to comply with new policies that were put in place to curb the spread and the effects of the virus. One of the aims of the current study was to analyse policy intervention and approaches used by governments in fighting both pandemics, the inclusion of the managers in the study looked to analyze the various policies and their effect on the businesses.

Role in the organization

The majority of the participants in the study were regular employees working in different departments. Expert analysis was important in the current research as it provided an analysis of the financial impact of the pandemic, hence the study recruited participants from different roles in their organizations including supervisors, analysts, accountants, managers and specialist.

Gross Annual Income

The majority (58%) of the participants were earning a gross annual income of between $60,000 to $79,999. Since majority of the participants were regular employers working in different roles at different organizations, the gross annual income was an average of $60,000 to79,000.

Experienced both COVID-19 and 2007 Recession

The research’s main question was, what were the main economic issues identified between the 2007/2008 economic crisis and the COVID-19 crisis. The researcher hence aimed at finding participants that experienced both the Covid-19 pandemic and the 2007 recession. To evaluate this research question, the researcher ensured that majority of the participants in the study experienced both the Covid-19 pandemic and the 2007 recession. The participants in the current study that experienced both the Covid-19 pandemic and the 2007 recession made up 98% of the participants.

Level of impact of 2007 recession on the economy on a scale of 1 to 5

The level of impact of the 2007 recession on the economy was analyzed based on a likert scale of 1 to 5 and the results based on the data analysis showed that most participants picked 5 on the scale showing that the impact on the economy was huge. 1 percent of the participants picked 3 on the likert scale.

Impact of 2007 recession on individual job and ability to borrow on a scale of 1 to 5

The study also analyzed the impact of the 2007 recession on an individual’s ability to borrow based on a likeart scale of 1 to 5, 1 having a positive effect while having a negative effect. The majority of the participants in the study noted that the 2007 recession had a negative impact on their individual job and ability to borrow based on a scale of 1 to 5. 3 % of the participants felt the pandemic had no effect on their ability to borrow, 4% of the participants noted that the 2007 recession had a positive impact on their ability to borrow at an individual level.

COVID-19 impact on individual job and ability to borrow on a scale of 1 to 5

The study also looked to compare the impact of the 2007 recession and the Covid-19 pandemic and their differences and similarities. The results from the likeart scale showed that 90% of the participants felt the Covid-19 pandemic had a negative impact on their ability to borrow. 10% of the participants felt that the pandemic had no effect on their ability to borrow.

2007 recession impact on Inflation

Another variable that the study used to look at the impact of the 2007 recession and the Covid-19 pandemic was inflation which is a measure of rice of prices of a commodity over a period of time. The results from the survey showed that 93% of the participants felt that the 2007 recession caused inflation while 7% of the participants felt that the 2007 recession had no impact on the inflation rate.

2007 recession impact on unemployment

The study also looked to measure the impact of the 2007 recession based on the rate of unemployment. 93% of the participants felt that the 2007 recession had a negative impact on unemployment based on the rate of job lay-offs and the ease of being employed after losing a job. 2% of the participants in the study felt that the 2007 recession had no impact on employment.

2007 recession impact on Interest rate

The study also looked at the impact of 2007 recession on the interest rate, 75% of the participants felt that the 2007 recession had an impact on the interest rate while 21% of the participants felt that the participants had moderate effect on the interest rate, 3 %of the participants felt that the 2007 recession had no effect on the interest rate.

COVID-19 impact on.Inflation

On the Covid-19 pandemic, 79% of the participants felt that the pandemic had a huge impact on the inflation rate, 17% of the participants felt that the pandemic had a moderate effect on inflation with 17% of the participants choosing 4 on the likeart scale, 4% of the participants chose 3 showing that the pandemic had minimal impact on the inflation rate.

COVID-19 impact on unemployment

The study also looked to measure the impact of the Covid-19 pandemic on the rate of unemployment. 39% of the participants felt that the Covid-19 pandemic had a negative impact on unemployment based on the rate of job lay-offs and the ease of being employed after losing a job. 17% of the participants in the study felt that the 2007 recession had a small impact on employment, 44 % of the participants felt that the Covid-19 pandemic had no impact on employment.

 

COVID-19 impact on interest rate

The study also looked at the impact of the Covid-19 pandemic on the interest rate, 7% of the participants felt that the Covid-19 pandemic had an impact on the interest rate while 29% of the participants felt that the participants had moderate effect on the interest rate, 64 % of the participants felt that the Covid-19 pandemic had no effect on the interest rate.

Similarity of the two on inflation

The study compared the two impacts based on inflation, 79% of the participants felt that the two were similar in terms of the rate of inflation while 21% of the participants felt that the two were different in terms of the rate of inflation.

Similarity of two on Unemployment

The study compared the two occurrences impacts based unemployment, 46% of the participants felt that the two were similar in terms of the rate of inflation on a scale of 5 while 20% of the participants felt that the two moderately similar on a scale of 3, 33% of the participants felt they were different in terms of the rate of inflation.

Similarity of the two on interest rate

On the interest rate between the two, 54% percent of the participants felt that the two were similar on a scale of 5 with 19% of the participants rating similarity on a scale of 3, 29% of the participants felt that the two were similar based on a scale of 1 showing that the two were different.

Was there a possible solution to the impacts of both

            The study looked to understand if the participants felt there was a possible solution of both the impacts that would have been crucial to reduce the impact of the two occurrences. 61% of the participants felt that there was a solution while 39% of the participants felt that the there was no possible solution to both the occurrences.

Exploratory Factor Analysis

Chi-squared Test
  Value df p
Model 50.499 44 0.232

 

Factor Loadings
  Factor 1 Uniqueness
Impact of 2007 recession on individual job and ability to borrow on a scale of 1 to 5 0.546 0.702
2007 recession impact on unemployment 0.489 0.760
COVID-19 impact on individual job and ability to borrow on a scale of 1 to 5 0.962
2007 recession impact on.Inflation 0.867
2007 recession impact on Interest rate 0.969
COVID-19 impact on.Inflation 0.981
COVID-19 impact on unemployment 0.997
COVID-19 impact on interest rate 1.000
Similarity of the two on.Inflation 0.978
Similarity of two on Unemployment 0.998
Similarity of the two on interest rate 0.936
Note.  Applied rotation method is promax.

 

Factor Characteristics
Unrotated solution Rotated solution
  SumSq. Loadings Proportion var. Cumulative SumSq. Loadings Proportion var. Cumulative
Factor 1 0.849 0.077 0.077 0.849 0.077 0.077

 

Principal Component Analysis

Chi-squared Test
  Value df p
Model 97.653 44 < .001

 

Component Loadings
  RC1 Uniqueness
Impact of 2007 recession on individual job and ability to borrow on a scale of 1 to 5 0.665 0.558
2007 recession impact on unemployment 0.631 0.602
2007 recession impact on.Inflation 0.540 0.708
Similarity of the two on interest rate -0.424 0.820
COVID-19 impact on individual job and ability to borrow on a scale of 1 to 5 0.882
2007 recession impact on Interest rate 0.907
COVID-19 impact on.Inflation 0.941
COVID-19 impact on unemployment 0.994
COVID-19 impact on interest rate 1.000
Similarity of the two on.Inflation 0.933
Similarity of two on Unemployment 0.995
Note.  Applied rotation method is promax.

 

Component Characteristics
Unrotated solution Rotated solution
  Eigenvalue Proportion var. Cumulative SumSq. Loadings Proportion var. Cumulative
Component 1 1.661 0.151 0.151 1.661 0.151 0.151

 

 

Quantitative Analysis

As mentioned, the selection of the sample size and constituents was based on inclusivity and validity of data obtained. Four hundred participants were selected as the representative sample for both the online and offline platforms as the research sought to collect enough data to deliver the most effective results for such a study. The selection helped to understand the impact across different segments to ensure that a piece of diverse information was collected as much as possible by understanding the impact on different categories of people. A total of 334 were collected which represented 83.5% of participants. From the sample collected, the graph shows a representation of gender, where male was 209 while female 125.

Figure 1

 

The analsyis took into acount the age distribution among the questionaires participants. The graph below shows the frequencies with the given age bracket. The highest number of particpants were age 45 to 54, while the lowest come from age bracker 75 to 85.

Figure 2

 

The questionnaires also captured the employment rate among the participants. The other (unspecified) that commonly indicated as self-employed (business) was the highest while the least was unemployed.

Figure 3

 

The other numerical factor that was important to highlight in the quantitative analysis is the annual salary. The graph below indicates the rate at which the participants are billed by various companies across Canada.

 

 

 

 

 

Figure 4

 

On the question asking the comparison between the Covid-19 and great recession. All-participants did answer the question. It provided significant understanding into the research questions and created a good sample size to effectively use the survey results. The respondents showed that 80% experienced both COVID-19 and 2007 recessions.

Figure 5

 

Regression Analysis

Employment Rate

            The employment rate seems to have not recovery from great recession compare to after 2020 pandemic, which employment rate have surpassed the pre-pandemic employment rare.

Figure 6

 

 

 

Qualitative

Figure 7

The above table shows the impact of great recession and covid on employment and economy

Figure 8

Variable influence on the great recession and great lockdown.

 

 

 

Figure 9

The above table show qualitative comparison of the variables both in great recession and great lockdown.

Results

             Since both the purposive sampling and random sampling were used in selecting participants in the study. Purposive sampling was used to collect qualitative data whereby knowledgeable participants were recruited. For the qualitative data, random sampling was deployed after which analysis through a mathematical formula was established. This was done to ensure that the required groups were involved in data collection. However, they were all selected from the general population but incorporated expertise to select a sample most useful to drive forward the research.  As a qualitative research, detailed knowledge regarding the underlying phenomenon was a great force for the selection. This avoided making general statistical inference but explore specific information. The data shows that there was high number of males compared to the females. Also, through observation, the researcher noted that respondents seem to have a clear knowledge on the impact of great recession than Covid-19 apart from the increase in unemployment. A respondent could narrate and even explain the impact of recessions. This is because many had read and written several articles on the negative’s effects of the great recessions.

From the observation, there were several factors and effects that the researcher was able to observe which include; disruption of food chain, business downturn, inflation, and high unemployment rate. Therefore, every individual aspect scrutinized, followed the most effective observation methodology in establishing a key and engaging attribute for the overall research. Identified variables are also core in the observation technique such that they align with the prospected outcomes. This also alleviated most of the assumptions which would be made along with the research. They also provided an adequate connection between the researcher and respondents as the information obtained was combined to develop a sufficient dataset used for analysis.

The findings of the study showed that the commonalities of both crises manifest in sharp declines in economic activity combined with equally sharp increases in unemployment. Yet, these aggregate changes mask a number of subtle differences in how and where impacts are the hardest felt. In the Great Recession of 2009, significant contractions in Gross Domestic Product (GDP) were largely limited to high- and middle-income countries, whereas many low-income countries experienced only mild reductions in income growth, if any at all. This is in stark contrast to the expected effects of the current crisis. According to the IMF’s latest World Economic Outlook, the Great Lockdown will again hit the GDP of high-income countries (-6.1 percent in 2020) proportionately more than the low-income ones (-1.0 percent in 2020), but seemingly, no country or country group will escape the crisis unscathed (Matysiak, Sobotka, & Vignoli, D2021). All-final, COVID-19 is expected to lead to much deeper recessions at both the country and global level than that of the Great Recession. Indeed, the commodity boom associated with the Great Recession proved beneficial to commodity exporters of emerging nations, especially those situated in Latin America and in “Developing and Emerging Europe”, whereby they reaped the rewards of soaring commodity prices. During the Great Lockdown, their fortunes are expected to reverse strongly to the point that they are foreseen to be the hardest hit, with concomitant economic contractions for each region of -5.2 percent in 2020 (Matysiak, Sobotka, & Vignoli, D2021).

Inflation, unemployment and interest rate are important factors that influence the GDP. While the group of low-income and middle-low-income countries escaped the Great Recession relatively unscathed, high-income countries had to bear the brunt of global shocks. These are at least the effects visible at a high level of aggregation across countries. This differentiation between rich and poor no longer holds for island economies. Practically all island states, rich and poor alike, saw their incomes plunge in 2009. They were exposed through a number of different channels, not least their high reliance on tourism and lack of diversification, on remittances and their distance to major markets, which made transportation to and from their markets more expensive. The 2020 crisis exerted an even more significant shock on island economies, given their massive dependency on the tourism and hospitality sector.

Factor Analysis

            There are three factors been considered to map the analysis; the exchange rate, income, food prices, interests’ rate, unemployment and credit market. Like any other research factor analysis is significant in drawing quantitative conclusion. It is approach where large variables are reducing to put them in common score. For the case of this research, exploratory factor analysis were used where Cronbach’s alpha though not statistics method but provided sufficient analysis of the underline variables. The main objective of the analysis was to monitor multiple observed variables that have similar patterns and significantly affected the great recession and great lockdown. The analysis was conducted for sample size of 334 people.

 

            The variable with the strongest association to the underlying latent variable. Factor 1, was income, with a factor loading of 0.65. From the above Cronbach’s alpha coefficients for various variables, it is clear that the pandemic unleashed an economic tornado. In the years preceding the 2008-09 GFC recession, US money and credit growth (as measured by our M3 proxy) exceeded 10% per annum, which was an unsustainable growth rate for an economy such as the US. When the housing market peaked and residential mortgage loans deteriorated, commercial banks’ (and shadow banks) were compelled to undertake a drastic “spring clean”, which caused money and credit to contract. In the immediate aftermath of the GFC, large scale stimulus programs were put in place consisting of monetary easing and fiscal support. On the monetary side, in addition to cutting interest rates almost to zero, the Fed and the Bank of England (BoE) both responded with Quantitative Easing from November 2008 in the case of the US and from March 2009 in the case of the UK. (The Euro-area and Japan did not adopt QE policies until March 2015 and April 2016 respectively.) However, because, as mentioned, money and credit in the US & UK were already contracting, these QE programs did little more than offset the declines in broad money; they did not lead to rapid monetary growth. All four economies suffered pandemic recoveries from 2009 onwards. One of the underlying reasons for the lack of adequate monetary stimulus in the wake of the 2008-09 crisis was that bank and household sector balance sheets, having been leveraged up in the years 2002-08, were severely impaired as a result of the crisis, requiring an extended period of balance sheet repair.

In the case of the banks, besides coping with the losses they faced, numerous new regulations were imposed such as the Dodd-Frank Act (in the US) and Basel III (internationally) which raised bank capital requirements substantially. Therefore, in addition to facing an environment of weak loan demand due to household and non-bank financial sector deleveraging, the banks themselves had to raise capital, which inevitably drew funds from their customers’ deposits and dampened their loan growth to a pace that was slower than it would otherwise have been. On the fiscal side, despite central government deficits in most advanced economies such as the US and UK of 10-12% of GDP in 2009-11, there was initially little success in achieving self-sustaining growth in the private sector other than in China. The reason was that China was the only economy that had successfully engineered rapid money growth. The failure of fiscal stimulus in the advanced economies illustrated very clearly the widely forgotten lesson that without money growth, fiscal spending only transfers spending from the private sector to the public sector; it does not add to total spending. Only in China where broad money growth (M2) doubled from 15% to 30% p.a. in 2008- 2010 did fiscal spending appear to succeed. However, appearances are deceiving; with the benefit of hindsight, we can see that it was the rapid money growth that fueled the increase in Chinese spending in 2009-11. In the developed west, the lack of money growth necessarily implied that fiscal stimulus could not succeed. Outside China, spending growth data – such as real and nominal GDP – therefore remained sub-par for most of the next decade.

The simple, straightforward answer is that it has been entirely different. After a decade of banking reforms (most notably Dodd-Frank and Basel III), commercial banks are much better capitalized and hold much higher levels of liquid assets now compared to 2008/09. Moreover, the household sectors in the US and the UK (and to a lesser extent in the Euro area and Japan) have de-levered significantly. Therefore, when the pandemic struck the developed economies in March 2020, instead of being unable to extend credit as they had been in 2008-09, these reforms allowed commercial banks to extend credit to the private non-financial sector in response to the sudden drawdown of credit lines by corporates. In the US we estimate that such drawdowns amounted to over US$400 billion in March and April alone. As an added bonus, US banks were also in a position to purchase US Treasury bills to partially fund the fiscal deficit. Three factors explain the surge in US broad money growth: the US$400 billion increase in lending by the banks to meet credit line drawdowns by companies (which were reflected in increased deposits for the banks), bank purchases of US$200 billion of Treasury bills (also matched by incremental deposits), and Fed purchases of securities from non-banks, which would be reflected in additions to deposits of the sellers of those securities. In combination these developments have caused US broad money growth to rise above 20% year-on-year – in marked contrast to what happened in the GFC. Comparing US broad money growth in the aftermath of the GFC with money growth during the Covid-19 pandemic recession. In our view the injection of substantial purchasing power into the US, UK and Euro-area economies in 2020 ensured a vigorous recovery in 2020-21. The shape of the recovery was similar to what happened in 1934-36 than what happened in 2009-2019.

Conclusion

The current chapter analyzed the research findings, research variables were investigated and findings recorded. The researcher analysed both tye qualitative and the quantitative data collected during the research process. The chapter provided an overview of the research participants, methods used and the research results. The next chapter will provide an analysis of the research findings and discussion on the research questions.

 

 

 

 

 

 

 

 

CHAPTER 5: DISCUSSION

Introduction

The Covid-19 epidemic is still having an influence on people all across the world, with the three main repercussions being loss of life, loss of employment, and a global economic catastrophe. The COVID-19 pandemic had a significant global impact, and by analyzing how society responded to the COVID-19 compared to the 2007 recession, one might think about better ways to prepare for similar events in the future. The analysis determined the elements affecting various societal sectors and the expected steps to take in preparing for a pandemic and financial crisis in the future. It encouraged people to take preventative action in the event of impending global shocks. The Great Recession was the second financial catastrophe to jolt the world economy and society. The sub-prime mortgage market in the USA was experiencing a severe crisis. Beginning in 2007, it quickly turned into a global banking crisis. It contributed to the European debt crises and, according to official records, lasted in the States until 2012. These two significant economic downturns had an equal and disparate impact on the financial sector and the rest of the world. The similarities and differences between the Covid-19 pandemic and the Great Recession of 2007 were unclear prior to the current investigation. In order to address the following research questions, a mixed methods approach was used in the study:

RQ1: What were the factors that were either similar or different and have negatively impacted the wellness of the economies of nations and the survival of businesses?

SQ1: What were the main economic issues identified between the 2007/2008 economic crisis and the COVID-19 crisis?

SQ2: What steps were involved in alleviating the crisis witnessed with COVID-19 and the economic crisis?

SQ3:  What lessons can be drawn in the future methods of addressing crisis across countries?

 

 

This chapter will provide an analysis of the research findings provided in Chapter 4. After this discussion, the researcher will discuss the conclusions of this study, and make recommendations for how future pandemics can be handled and how financial crises can be handled in a proper way to avert further effects.

Discussion and Analysis of results

The data in chapter 4 represents the results from the survey questions on the impact comparison of COVID-19 and 2007 recession. From the above analysis, it can be taken into count that 100% of the respondents in the study acknowledge that both COVID-19 and 2007 recession had impact in the economy. minutes can be taken to capture data during workshops and meeting. 76% agreed that 2007 affected them personally versus 81% for COVID-19.

On the questions of if there are similarities between COVID-19 and 2007 recession on the changes in the economy, all the respondents responded positively. From the graph below, 2007 saw higher unemployment than COVID-19. The government availed stimulus to allows employers to retain their workforce in Canada and supported business with operations costs to remain in operations. COVID-19 saw a high peak in house prices driven by inflation versus high interest rate during 2007 recession.

Interest rate and economic

The 2007-2009 crisis was in its core a “credit crunch” – a sharp drop in liquidity – which mainly affecting developed markets. Higher food prices and economic spill-over effects notwithstanding, developing countries remained less directly affected, not least in their lower exposure to the financial instruments (sub-prime mortgages, CDOs) that were undermining the financial sector in developed countries. The 2020 crisis also affected credit markets and there are reasons to assume that developing countries were hit, given their high indebtedness in foreign currencies, sharply falling exchange rates and low commodity and energy prices which made it harder to service these debts (Moreira & Hick, 2021). In response to the COVID-19 crisis, central banks around the world intervened in lowering interest rates. By 23 March 2020, 39 central banks had lowered interest rates or increased liquidity. Despite these interventions, market rates for borrowing fresh capital have often risen, particularly in low-income countries.

A Jubilee Debt Campaign (jubileedebt.org, 2020) reported that interest rates have on average risen by 3.5 percentage points for low- and middle-income countries since mid-February, and that costs for new borrowing stood at 10 percent. A recent report (UNCTAD, 2020) by the United Nations Conference on Trade and Development (UNCTAD) showed how sustained debts could pose a larger problem for the global economy and financial system. According to the report, in 2018, total debt (private, public, domestic and external) across developing countries was equal to almost twice their combined GDP—the highest ever (Moreira & Hick, 2021). The build-up of private debt by non-financial corporations, e.g., private and public enterprises, which now amounts to nearly three-quarters of total debt in developing countries (a much higher ratio than in advanced economies), is seen as particularly concerning. According to UNCTAD, inherently volatile “foreign shadow financial institutions” have played a major role in fueling this accumulation, such that around one-third of private non-financial corporate debt is located in low-income countries.

Similarly, a report by the IMF (IMF, Macroeconomic Developments and Prospects in Low-Income Developing Countries, 2018) shows that rising debt levels have led to increased debt vulnerabilities in many low-income developing countries (LIDCs). While debt vulnerabilities remain contained in the majority of LIDCs, some 40 percent of them currently face significant debt-related challenges, up from 21 percent in 2013. Nine-of-twelve countries that moved from “low/moderate risk” to “high risk/in debt distress” are located in sub-Saharan Africa. With rising costs for capital, the impacts would also be felt in agriculture, notably capital-intensive forms of production (Wilson, (2020). Credit markets could become an important channel of transmission, adversely affecting capital-intensive agriculture. Capital intensive production in low-income countries (e.g., row crops in Latin America) could be particularly hard hit. This would further deteriorate the commodity terms-of-trade for many commodity-dependent LIDCs that has been underway since the last price hike in 2012.

Inflation and economic

One of the immediate outcomes to the 2020 COVID-19 crisis was an adverse change in exchange rates. The figure below presents the changes in exchange rates since January 2019 for most of the largest economies relative to the CAD Dollar. A common feature of the currency shifts was a significant (trade-weighted) appreciation of the CAD dollar against almost all other currencies, visible. The below showed spike in 2020.

 

https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates/

The same holds, albeit to a lesser extent, for the Euro. The rising US Dollar prior to and during the Great Lockdown has had immediate impacts on world trade and international prices. The Dollar strength made non-US exporters more competitive and kept a lid on US Dollar denominated commodity prices, notably maize and sugar, which suffered from both lower energy prices and high export availabilities. Over the medium-term, the Dollar strength in conjunction with higher commodity prices could add to inflationary pressures in commodity exporting countries. It also added to existing problems in servicing dollar-denominated debts, which have seen a massive increase over the past years. The exact opposite shifts in exchange rates were observed during and after the Great Recession. Particularly the so-called commodity currencies that benefited from a run-up in commodity prices and saw their currencies appreciate vis-à-vis the US Dollar. Comparing the trade-weighted changes in exchange rates against the US Dollar between the two crises. In a first impact assessment, the World Trade Organization (WTO) estimated that total merchandise trade is fell between 13 to 32 percent in 2020 (WTO, Trade set to plunge as COVID-19 pandemic upends global economy, 2020).

The WTO notes that “the wide range of possibilities for the predicted decline is explained by the unprecedented nature of this health crisis and the uncertainty around its precise economic impact. But according to WTO the decline exceeded the trade slump brought on by the global financial crisis of 2008-09” Wilson, D. J. (2020). The WTO offers two recovery scenarios and only in the optimistic case, global merchandise trade is likely to resume its pre-crisis trajectory. After the financial crisis of 2008- 09, trade never returned to its previous trend. The WTO notes that a “strong rebound is more likely if businesses and consumers view the pandemic as a temporary, onetime shock. In this case, spending on investment goods and consumer durables could resume at close to previous levels once the crisis abates”. If the outbreak is prolonged and/or recurring uncertainty becomes pervasive, households and business are likely to spend more cautiously. The WTO study also offered estimates of the extent of impacts across major groups, both across merchandise trade and trade in services (WTO, Methodology for the WTO Trade Forecast of April 8 2020, 2020). Unsurprisingly, trade in health care services was least affected. It declined by -1.2% (V-shaped), -6.4% (U-shaped) and – 8.0% (L-shaped recovery). Trade in basic pharmaceutical products to rose, because it is an important input into the Health Care sector, whose demand alone in the public sector is assumed to rise by 50 percent.

Conclusion

From the data analysis, it is clear that there are significant underlying similarities and differences Covid 19 pandemic and 2007/2008 financial crisis that are essential part of establishing economic factors when exposed to diverse variables. Similarities would lead to the realization of how COVID-19 can be dealt with using the same economic variables used during the 2007/2008 recession. This would save more on time required and avoid other measures while the existing ones can address the underlying problems.  In 2020 January, when Covid pandemic was at it pick, the data show that the rising US Dollar prior to and during the Great Lockdown has had immediate impacts on world trade and international prices. The Dollar strength has made non-US exporters more competitive and kept a lid on US Dollar denominated commodity prices, notably maize and sugar, which suffered from both lower energy prices and high export availabilities.  Similarly, from the credits markets, On the fiscal side, despite central government deficits in most advanced economies such as the US and UK of 10-12% of GDP in 2009-11, there was initially little success in achieving self-sustaining growth in the private sector other than in China.

Secondly, From the Cronbach’s alpha coefficients analysis, it is clear that the pandemic has unleashed an economic tornado. In the years preceding the 2008-09 GFC recession, US money and credit growth (as measured by our M3 proxy) exceeded 10% per annum, which is an unsustainable growth rate for an economy such as the US. When the housing market peaked and residential mortgage loans deteriorated, commercial banks’ (and shadow banks) were compelled to undertake a drastic “spring clean”, which caused money and credit to contract. According to the IMF’s latest World Economic Outlook, the Great Lockdown will again hit the GDP of high-income countries (-6.1 percent in 2020) proportionately more than the low-income ones (-1.0 percent in 2020), but seemingly, no country or country group will escape the crisis unscathed.

 

 

 

 

 

References

Clark, V. L. P., & Creswell, J.W. (2017). Designing and conducting mixed methods research. Los Angeles, CA: SAGE Publishing.

Gertler, M., & Gilchrist, S. (2018). What happened: Financial factors in the great recession. Journal of Economic Perspectives, 32(3), 3-30.

Matysiak, A., Sobotka, T., & Vignoli, D. (2021). The Great Recession and fertility in Europe: A sub-national analysis. European Journal of Population, 37(1), 29-64.

Moreira, A., & Hick, R. (2021). COVID‐19, the Great Recession and social policy: Is this time different. Social Policy & Administration, 55(2), 261-279.

Wilson, D. J. (2020). The COVID-19 Fiscal Multiplier: Lessons from the Great Recession. FRBSF Economic Letter, 2020(13), 1-5.

 

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