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European business cycles and economic policy, 1945-2007

Author

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  • Battilossi, Stefano
  • Foreman-Peck, James
  • Kling, Gerhard

Abstract

In the first age of rapid economic growth after 1945, fluctuations of western European output and employment were so mild that the very notion of a cycle was transformed or even seemed obsolete. A second period of much slower average economic growth was marked by large and frequent oscillations, associated with the oil shocks and the Great Inflation of the 1970s and early 1980s. The last phase, characterized by smooth and ampie swings in output and inflation, has been dubbed the Great Moderation , reflecting the gradual reduction of inflationary trends. Different reasons have been proposed for these changing patterns but a common factor is that the conduct of economic policy was critical. In this paper we survey the evolution of basic features of cycles in Europe, such as volatility and synchronization; explain why changes in economic policy-making were a fundamental driver of changing patterns; and provide analytical narratives of the responses of national governments and central bankers to cyclical fluctuations. Finally we briefly look at the historical and recent experience of Eastern Europe, assessing the área s reintegration from 1989 after the long economic decoupling from the rest of the continent in 1945.

Suggested Citation

  • Battilossi, Stefano & Foreman-Peck, James & Kling, Gerhard, 2008. "European business cycles and economic policy, 1945-2007," IFCS - Working Papers in Economic History.WH wp08-13, Universidad Carlos III de Madrid. Instituto Figuerola.
  • Handle: RePEc:cte:whrepe:wp08-13
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 1-48.
    2. Kontorovich, Vladimir, 1990. "Utilization of Fixed Capital and Soviet Industrial Growth," Economic Change and Restructuring, Springer, vol. 23(1), pages 37-50.
    3. Michael Michaely, 1971. "The Responsiveness of Demand Policies to Balance of Payments: Postwar Patterns," NBER Books, National Bureau of Economic Research, Inc, number mich71-1.
    4. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
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    Cited by:

    1. Eric Monnet, 2012. "Monetary policy without interest rates. Evidence from France’s Golden Age (1948-1973) using a narrative approach," Working Papers 0032, European Historical Economics Society (EHES).

    More about this item

    Keywords

    Business cycle;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N36 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Latin America; Caribbean

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