Business Cycles in History

This paper is a thoroughly revised and extended version of an article firstly published in the anthology "Moderne Wirtschaftsgeschichte" (München: Oldenbourg) in 1996. This book is an introduction to modern economic history for historians and economists. Accordingly this paper has to two objectives: Firstly, it presents economic theory explaining business cycles to historians. Secondly, for economists it illustrates both the possibilities and problems to detect and understand business cycles in the past. The paper is organised as follows: Section 1 sets the scene. It describes the approach of business cycles and provides a number of essential definitions. The next section shortly illustrates business cycles in the past 200 years in Germany (2). Section 3 deals with business cycle theory. To start with, it highlights the long tradition of theories that have sought to explain business cycles (3.1). Secondly it explains the "standard paradigm" (3.2). Thirdly it reviews the latest developments in business cycle theory (3.3). Section 4 discusses the application of business cycle theory in historical research. The last section deals with open questions and unsolved problems from a historian's point of view.