UK GDP Time Series Data

[Badly Shaved Monkey]

In today's Guardian a piece about the economic crisis was illustrated with a graph of quarterly GDP data.

Unfortunately, the graph doesn't seem to have been reproduced in the online version, but here is a link to the source data. Follow the links to obtain the series called IHYQ. Also get the YBEZ data.

Download the data into an appropriate spreadsheet package and graph it.

Right, now here's the thing- yes, you can eyeball the recessions of the early 70's, late 70's, early 90's and today (especially in YBEZ, which is effectively the cumulative change), but I found the most striking thing about the data is the extraordinary variability in the IHYQ data from before about 1990.

What is going on? Was the UK economy really going up and down like a whore's drawers for the first 35 of the last 50 years or is there a technical statistical reason, in which case how much reliance can be placed on these data?

 

[Francesca R]

UK GDP had much higher volatility (instability) in the 1980s and before then, yes. Same for the rest of G7 pretty much. Inflation cycles were of larger amplitude too, and in fact it is believed by many (if not most) that the volatility of inflation and the struggle to control it was the cause of the wilder variation in business cycle.

There are various hypotheses as to why this has changed. The most convincing to me involve generally greater concentrations of bargaining power in price-setting processes in the 1980s and earlier, and the examples mentioned most are things like labour unions and OPEC, both of which have lost virtually all of their prior pricing power now.

(Note that these explanations completely bypass any notion of what central banks and monetary policy had to do with things, and that's one of the reasons I find them more convincing)