DISCONTINUITIES IN COMPETITIVENESS - THE IMPACT OF THE FIRST-WORLD-WAR ON BRITISH INDUSTRY

Using modern time series methods this article argues that Britain's lo ng-term industrial growth was segmented by the macroeconomic shock of the First World War. The statistical results identify a sustained gap between actual and potential output arising from the onset and the aft ermath of the war. The explanation centres on the collapse of aggregat e competitiveness associated with a 30 per cent real exchange rate app reciation for industry. The results play down the detrimental effects of the return to gold and the US crash, and by implication cast doubt on structural interpretations of interwar industrial performance.