Covid-19: Industry Level Origins of Fluctuations in Growth Rates and Economic Welfare

The impact of the COVID-19 shock on the UK economy has been heterogeneous across sectors, suggestive of significant reallocation as the economy recovers.

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Summary & aims

The UK government support for the economy has therefore been targeted at specific sectors in order to be effective. This project provides a framework for estimating expected sector-level economic growth rates in real time by combining sector-level data on asset prices with a model connecting asset prices to expected sector-level economic growth rates.


Using an asset pricing theory model based on an extension of the work by Bahmra, Kuehn and Strebulaev (2011), we use sector-level stock prices and dividends to derive equations linking these variables to expected long run growth rates of dividends and wages across sectors. By basing our analysis on asset prices, we can update our estimates of sector-level growth rates In real time. This is important, because (i) sector-level macroeconomic data often lags events. Secondly, existing work has exploited asset prices to estimate aggregate growth rates for the US, but no such work exists at the sectoral level.

The evaluation began in January 2020 and will be completed over a period of 18 months.


Principal Investigator


Patricia Sánchez Juanino
Database Manager
Kemar Whyte
Senior Economist