Dating Business Cycles in the United Kingdom, 1700-2010

Journal: Economic History Review

Date: 20231101

Author: Broadberry, Stephen; Chadha, Jagjit S.; Lennard, Jason; Thomas, Ryland

Abstract:
This paper constructs a new chronology of the business cycle in the United Kingdom from 1700 on an annual basis and from 1920 on a quarterly basis to 2010. The new chronology points to several observations about the business cycle. First, the cycle has significantly increased in duration and amplitude over time. Second, contractions have become less frequent but are as persistent and costly as at other times in history. Third, the typical recession has been tick-shaped with a short contraction and longer recovery. Finally, the major causes of downturns have been sectoral shocks, financial crises, and wars.

Link: Google Scholar

Key Findings

Longer Business Cycles

The British business cycle has significantly increased in duration and amplitude between 1700-2010, quadrupling in length from 3.4 to 16 years

Evolution of Recessions

Recessions have become less frequent but remain as persistent and costly as historical downturns, with a typical "tick-shaped" pattern

Changing Causes

Major causes of downturns have evolved from primarily agricultural shocks in the 18th century to financial crises and policy decisions in modern times

Business Cycle Duration and Frequency Over Time

Shows how business cycle characteristics have changed across four major historical periods
Mean duration increased from 3.4 years (1701-1816) to 16.0 years (1948-2009)
Demonstrates the fundamental transformation of the British economy's cyclical patterns

Causes of Recessions Over Time

Illustrates the shifting causes of economic downturns across three centuries
Sectoral shocks declined from 46.5% to 6.3% of recession causes
Economic policy emerged as a major factor in the 20th century, causing 25% of recessions

Average Recession Shape

Shows the typical "tick-shaped" pattern of British recessions
Average 2.5% GDP decline in first year followed by gradual recovery
Pre-recession peak typically surpassed by third year of recovery

Contribution and Implications

First comprehensive business cycle chronology for Britain spanning 1700-2010
Provides crucial historical context for understanding modern economic fluctuations
Demonstrates how economic stabilization mechanisms have evolved over three centuries