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CR 20:153-166 (2002)  -  doi:10.3354/cr020153

Macroeconomic effects of weather shocks, 1870-1913

Solomos Solomou1,*, Weike Wu2

1Faculty of Economics, Cambridge University, Austin Robinson Building, Sidgwick Avenue, Cambridge CB3 9DD, United Kingdom
2Business Statistics Department, Ecclesiastical Insurance, Brunswick Road, Gloucester GL1 1JZ, United Kingdom
1Most economists dismiss Jevons¹ approach to economic cycles as mechanical and simplistic. In fact his theory is neither. Jevons started with the observation that it is not possible to find a solar cycle in European grain prices (Jevons 1884, p. 231). To get a more convincing theory of the British cycle, he considered fluctuations in trade with India, where on average the sunspot cycle is correlated with periodic famines. The demand shocks in India are then transmitted to the British economy via trade links. We are most grateful to a referee of this journal for elaborating this point

ABSTRACT: This paper considers the influence of weather shocks at a disaggregated level of analysis, modelling the effects of weather shocks on British agriculture, construction and energy demand over the period 1870-1913. The impact of weather shocks will vary from sector to sector as the conditions favouring one activity may be adverse to another. The sectoral effects are aggregated to give us an estimate of the macroeconomic effects of weather on business cycle fluctuations.

KEY WORDS: Business cycles · Climate impact

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