Dating Business Cycles in the United Kingdom, 1700–2010
(2023) In Economic History Review 76(4). p.1141-1162- 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.
As with any modern economy, the British economy is subject to recurring fluctuations in economic activity, which are typically... (More) - 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.
As with any modern economy, the British economy is subject to recurring fluctuations in economic activity, which are typically called business cycles. They are not uniform sine waves but irregular phenomena driven by different shocks across an economic structure that is not itself constant, which policy interventions may attenuate or amplify. These fluctuations have their own narrative and are often described as booms or busts.
While there is a rich history of trying to timestamp these events for the United Kingdom, going back to the seminal contributions of Burns and Mitchell, Gayer et al., Ashton, and Rostow, the result is a patchwork of chronologies, which do not provide a clear, long-run picture of the peaks and troughs in British economic activity.1 Although impressive in the longue durée, the evidence is imperfect.
A reliable record of the turning points in the business cycle is important for a number of reasons. First, this contextualizes modern slumps and recoveries in terms of past experience. Second, business cycle chronologies provide an important input into economic research, such as for highlighting periods of expansion and contraction and for studying non-linearities over booms and busts.2 Third, recording the past incidence of expansions and contractions allows us to calculate not only the unconditional probability of each event but also the conditional probability, which may help us to answer questions such as why recessions occur. And turning full circle, we hope that this chronology may help scholars write their own narratives about particular episodes in economic history.
In this paper, we construct a new chronology of the business cycle in the United Kingdom. The chronology extends back to 1700 on an annual basis and back to 1920 on a quarterly basis. To do so, the National Institute of Economic and Social Research (NIESR) has formed the UK Business Cycle Dating Committee, comprising leading academics and policymakers. The chronology is based on the authors’ judgement in consultation with the committee and the most reliable national accounts available. In the interest of transparency, we provide a narrative overview of each business cycle. As the quality of the national accounts is not perfect, we communicate the uncertainty with reliability grades.
A number of business cycle facts emerge from the new chronology. First, the business cycle has increased in both duration and amplitude between the long eighteenth century (1701–1816) and the postwar period (1948–2009), extending in duration from 3.4 to 16 years and rising in amplitude from 3.2 per cent to 51.9 per cent. Second, recessions since the Second World War have been longer and more severe than in the Pax Britannica (1817–1908), although less so than the transwar period (1909–47).3 Third, the average recession has been tick-shaped with a short contraction and a slightly longer recovery. Fourth, the main causes of British recessions have been sectoral shocks, financial crises, and wars.
This paper is structured as follows. Section I discusses previous chronologies of the British business cycle. Section II outlines the methodology. Section III details the data. Section IV presents the results. Section V concludes. Appendix A reports the membership of the UK Business Cycle Dating Committee. Appendix B describes a history of business cycles in the United Kingdom between 1700 and 2010. Appendix C overviews our quarterly gross domestic product (GDP) estimates for the United Kingdom between 1938 and 1955. Appendix D provides additional information.
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- author
- Lennard, Jason LU ; Broadberry, Stephen ; Chadha, Jagjit and Thomas, Ryland
- organization
- publishing date
- 2023
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Economic History Review
- volume
- 76
- issue
- 4
- pages
- 1141 - 1162
- publisher
- Wiley-Blackwell
- external identifiers
-
- scopus:85147379653
- ISSN
- 1468-0289
- DOI
- 10.1111/ehr.13238
- language
- English
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- yes
- id
- 74af4754-5dfe-4778-9686-33e0ed8afbba
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@article{74af4754-5dfe-4778-9686-33e0ed8afbba,
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.<br/><br/>As with any modern economy, the British economy is subject to recurring fluctuations in economic activity, which are typically called business cycles. They are not uniform sine waves but irregular phenomena driven by different shocks across an economic structure that is not itself constant, which policy interventions may attenuate or amplify. These fluctuations have their own narrative and are often described as booms or busts.<br/><br/>While there is a rich history of trying to timestamp these events for the United Kingdom, going back to the seminal contributions of Burns and Mitchell, Gayer et al., Ashton, and Rostow, the result is a patchwork of chronologies, which do not provide a clear, long-run picture of the peaks and troughs in British economic activity.1 Although impressive in the longue durée, the evidence is imperfect.<br/><br/>A reliable record of the turning points in the business cycle is important for a number of reasons. First, this contextualizes modern slumps and recoveries in terms of past experience. Second, business cycle chronologies provide an important input into economic research, such as for highlighting periods of expansion and contraction and for studying non-linearities over booms and busts.2 Third, recording the past incidence of expansions and contractions allows us to calculate not only the unconditional probability of each event but also the conditional probability, which may help us to answer questions such as why recessions occur. And turning full circle, we hope that this chronology may help scholars write their own narratives about particular episodes in economic history.<br/><br/>In this paper, we construct a new chronology of the business cycle in the United Kingdom. The chronology extends back to 1700 on an annual basis and back to 1920 on a quarterly basis. To do so, the National Institute of Economic and Social Research (NIESR) has formed the UK Business Cycle Dating Committee, comprising leading academics and policymakers. The chronology is based on the authors’ judgement in consultation with the committee and the most reliable national accounts available. In the interest of transparency, we provide a narrative overview of each business cycle. As the quality of the national accounts is not perfect, we communicate the uncertainty with reliability grades.<br/><br/>A number of business cycle facts emerge from the new chronology. First, the business cycle has increased in both duration and amplitude between the long eighteenth century (1701–1816) and the postwar period (1948–2009), extending in duration from 3.4 to 16 years and rising in amplitude from 3.2 per cent to 51.9 per cent. Second, recessions since the Second World War have been longer and more severe than in the Pax Britannica (1817–1908), although less so than the transwar period (1909–47).3 Third, the average recession has been tick-shaped with a short contraction and a slightly longer recovery. Fourth, the main causes of British recessions have been sectoral shocks, financial crises, and wars.<br/><br/>This paper is structured as follows. Section I discusses previous chronologies of the British business cycle. Section II outlines the methodology. Section III details the data. Section IV presents the results. Section V concludes. Appendix A reports the membership of the UK Business Cycle Dating Committee. Appendix B describes a history of business cycles in the United Kingdom between 1700 and 2010. Appendix C overviews our quarterly gross domestic product (GDP) estimates for the United Kingdom between 1938 and 1955. Appendix D provides additional information.<br/>}},
author = {{Lennard, Jason and Broadberry, Stephen and Chadha, Jagjit and Thomas, Ryland}},
issn = {{1468-0289}},
language = {{eng}},
number = {{4}},
pages = {{1141--1162}},
publisher = {{Wiley-Blackwell}},
series = {{Economic History Review}},
title = {{Dating Business Cycles in the United Kingdom, 1700–2010}},
url = {{http://dx.doi.org/10.1111/ehr.13238}},
doi = {{10.1111/ehr.13238}},
volume = {{76}},
year = {{2023}},
}