European booms and busts over six centuries

We examine the impact of economic upturns and downturns on subsequent economic performance in Europe over six plus centuries. Instead of utilizing the conventional post-World War II framework, we employ a comprehensive panel of GDP data for England, Holland and Italy spanning more than 600 years. We find consistent evidence in favor of asymmetry. Downturns are followed by statistically significant higher growth rates, while upturns are followed by mildly lower growth rates which are often not statistically significant. Our finding of asymmetry suggests that business cycle properties are consistent with mechanisms similar to Friedman’s plucking hypothesis. • We examine the impact of economic upturns and downturns on subsequent economic performance. • We employ a panel of GDP data for England, Holland and Italy spanning over 600 years. • We estimate impulse response functions using the local projections methodology. • We find consistent evidence in favor of asymmetry. • Downturns (upturns) are followed by higher growth rates (mildly lower growth rates).