Long-Run Trends in Long-Maturity Real Rates, 1311-2022
American Economic Review, 2024

Rogoff, Kenneth S.; Rossi, Barbara; Schmelzing, Paul
Taking advantage of key recent advances in long-run economic and financial data, we analyze the statistical properties of global long-maturity real interest rates over the past seven centuries. In contrast to existing consensus, we find that real interest rates are in fact trend stationary and exhibit a persistent downward trend since the Renaissance. We investigate structural breaks in real interest rates over time and find that overall the Black Death and the 1557 "Trinity default" appear as consistent inflection points. We further show that demographic and productivity factors do not represent convincing drivers of real interest rates over long spans.

Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany
Journal of Political Economy, 2024

Papadia, Andrea; Schioppa, Claudio A.
We investigate how internal distribution motives can affect the implementation of an important macroeconomic policy: capital controls. To do this, we study one of history's largest debt repatriations, which took place under strict capital controls in 1930s Germany, providing a wealth of quantitative and historical evidence. We show that the authorities kept private repatriations under strict control, thus avoiding detrimental macroeconomic effects, while allowing discretionary repatriations in order to reap internal political benefits. We formalize this mechanism in a model in which elite capture can affect optimal debt repatriations and the management of official reserves under capital controls.

Inflation and Individual Investors' Behavior: Evidence from the German Hyperinflation
Review of Financial Studies, 2023

Braggion, Fabio; von Meyerinck, Felix; Schaub, Nic
We analyze how individual investors respond to inflation. We introduce a unique data set containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the German hyperinflation. We find that individual investors buy fewer (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. Moreover, we document a positive relation between local inflation and forgone returns following stock sales. Our findings are consistent with individual investors suffering from money illusion. Alternative explanations, such as consumption needs, are unlikely to drive our results.

Sticky Wages and the Great Depression: Evidence from the United Kingdom
European Review of Economic History, 2023

Lennard, Jason
How sticky were wages during the Great Depression? Although classic accounts emphasise the importance of nominal rigidity in amplifying deflationary shocks, the evidence is limited. In this paper, I calculate the degree of nominal wage rigidity in the United Kingdom between the wars using new granular data covering millions of wages. I find that nominal wages changed infrequently but that wage cuts were more common than wage rises on average. Nominal wage adjustment fluctuated over time and by state, so that in 1931 amid falling output and prices more than one-third of workers received wage cuts.

Measuring Inflation Expectations in Interwar Britain
Economic History Review, 2023

Lennard, Jason; Meinecke, Finn; Solomou, Solomos
What caused the recovery from the British Great Depression? A leading explanation--the 'expectations channel'--suggests that a shift in expected inflation lowered real interest rates and stimulated consumption and investment. However, few studies have measured, or tested the economic consequences of, inflation expectations. In this paper, we collect high-frequency information from primary and secondary sources to measure expected inflation in the United Kingdom between the wars. A high-frequency vector autoregression suggests that inflation expectations were an important source of the early stages of economic recovery in interwar Britain.