That weather and climate are affected by solar cycles is highly likely even if it is not part of the mainstream climate theories (though I think it is patently obvious). That climate and weather affect food production is clear and that this must impact the economic cycle is not so far fetched. Yet it has never been part of mainstream economic thinking that there will be a connection from the solar cycle to global economic cycles. Back in 1801 William Herschel observed the apparent connection between the sunspot cycles and the price of wheat. Since then many economists have returned at regular intervals to studying the link between the 11 year sunspot cycle and the behaviour of the global economic cycle. It is becoming increasingly clear that the economic cycle is not unconnected with solar cycles but the mechanisms are far from clear.
Mikhail Gorbanev an economist at the IMF has a fascinating new paper that became available last month at the University of Munich. He does add this Caution though!
Caution: This research is not in the “mainstream” of the economic thought. Read at your own risk!
“Sunspots, unemployment, and recessions, or Can the solar activity cycle shape the business cycle?,” MPRA Paper 40271, University Library of Munich, Germany. (pdf Gorbanev Business Cycle and solar cycles MPRA_paper_40271)
Gorbanev shows some interesting correlations and goes on to predict that “For other advanced economies, the upcoming solar maximum also suggests higher chances of recessions. The 3-year period when the recessions are most likely to occur in the G7 countries would run from early 2013 till end-2015”.
Whether there will be a sharp increase in US unemployment after the solar maximum remains to be seen. But it is not so unlikely that the world economy has another 2 – 3 tough years ahead!
Sunspot cycles and US unemployment (Gorbanev 2012)
Abstract
Over the last 77 years (from 1935), all 7 cyclical maximums of the solar activity overlapped closely with the US recessions, thus predicting (or triggering?) 8 out of 13 recessions officially identified by NBER (including one “double-deep” recession). Over the last 64 years (from 1948), all 6 maximums of the solar activity were preceded by minimums of the US unemployment rate, and the spikes in the unemployment rate followed with lags of 2-3 years. On the world scale, over the last 44 years (for which the data is available), all 4 maximums of the solar activity overlapped with minimums of the unemployment rate in the G7 countries, followed by its spikes within 2-3 years. From 1965, when consistent recession dating is available for all G7 countries, nearly 3/5 of the recessions started in the 3 years around and after the sunspot maximums. Was it a mere coincidence or a part of a broader pattern? This paper explores the correlation between the solar activity cycles (as measured by the number of sunspots on the sun surface) and the timing of recessions in the US and other economies. It finds out that the probability of recessions in G7 countries greatly increased around and after the solar maximums, suggesting that they can cause deterioration in business conditions and trigger recessions. This opens new approach for projecting recessions, which can be applied and tested with regard to the next solar maximum in 2013.
Tags: Economic cycle, Gorbanev, IMF, solar cycle, solar effects on economy, solar maximum
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