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Inflation expectations and the recovery from the Great Depression in Germany

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  • Daniel, Volker
  • Steege, Lucas ter

Abstract

A regime shift toward increased inflation expectations is credited with jump-starting the recovery from the Great Depression in the United States. What role did inflation expectations play in Germany that experienced a similarly successful economic upturn in the 1930s? We study inflation expectations in the German recovery across several methods: we conduct a narrative study of media sources; we estimate inflation expectations from a factor-augmented vector autoregression model, real interest rate forecasts, and quantitative news series. Consistently across these approaches, we do not find a shift to increased expected inflation. This recovery was different, and its causes lie elsewhere.

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  • Daniel, Volker & Steege, Lucas ter, 2020. "Inflation expectations and the recovery from the Great Depression in Germany," Explorations in Economic History, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:exehis:v:75:y:2020:i:c:s0014498318301554
    DOI: 10.1016/j.eeh.2019.101305
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    Cited by:

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    6. Martin Ellison & Sang Seok Lee & Kevin Hjortshøj O’Rourke, 2020. "The Ends of 30 Big Depressions," Economics Series Working Papers 896, University of Oxford, Department of Economics.

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    More about this item

    Keywords

    Inflation expectations; Great Depression; Inflation forecasting; Regime change; Germany; Narrative evidence;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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