Working Papers of the Priority Programme 1859 – Experience and Expectation. Historical Foundations of Economic Behaviour

Permanent URI for this collectionhttp://edoc.hu-berlin.de/18452/621

Arbeitspapiere des Schwerpunktprogramms 1859 der Deutschen Forschungsgemeinschaft „Erfahrung und Erwartung. Historische Grundlagen ökonomischen Handelns“ / Working Papers of the German Research Foundation’s Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour”

Published in co-operation with the documentation and publication service of the Humboldt University, Berlin (https://edoc.hu-berlin.de).

ISSN: 2510-053X
Redaktion: Alexander Nützenadel, Jochen Streb, Mark Jakob
V.i.S.d.P.: Alexander Nützenadel, Jochen Streb
SPP 1859 "Erfahrung und Erwartung. Historische Grundlagen ökonomischen Handelns"
Sitz der Geschäftsführung:
Humboldt-Universität
Friedrichstr. 191-193, 10117 Berlin
Tel: 0049-30-2093-70615, Fax: 0049-30-2093-70644
Web: https://hu.berlin/spp1859
Koordinatoren: Alexander Nützenadel, Jochen Streb
Assistent der Koordinatoren: Mark Jakob

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Now showing 1 - 20 of 46

2024-08Diskussionspapier
The fate of the passbook: Why it vanished in the US but survived in Germany during the stagflation period (1966–1983)
(Philosophische Fakultät) Knake, Sebastian
In his article, Sebastian Knake challenges the general assumption that traditional savings accounts in the US disappeared naturally as a result of the combination of interest rate regulation and extraordinarily high market interest rates during the stagflation period. By comparing the US experience with simultaneous developments in West Germany, he finds that the opportunity costs of owning a regular passbook were comparable in both countries. In contrast to the US case, however, the passbook remained a cornerstone of household saving in Germany. Drawing upon research in several bank archives in the US and Germany, Knake explains these divergent developments in terms of fundamental differences in how banks and their customers communicated over prices. In the US, a peculiar combination of regulative rules forced banks, and especially savings institutions, to aggressively promote new types of bank accounts that were introduced by federal regulation authorities, thereby increasing nominal interest rate expectations. In Germany, by contrast, banks confined information about advantageous investment opportunities to the smallest possible share of the customer base. These divergent communication strategies reflect a difference in the balance of power in the bank–customer relationship. Ger man customers depended on their primary—and in most cases only—bank relationship to acquire information on alternative investments, while US customers could draw on several relationships with banks and savings institutions to obtain the relevant information. Thus, the fate of the passbook was sealed by the ability or inability of banks to keep their customers in the dark about the real opportunity costs of passbook saving.
2024-07Diskussionspapier
Inefficient forecast narratives: A BERT-based approach
(Philosophische Fakultät) Foltas, Alexander
I contribute to previous research on the efficient integration of forecasters’ narratives into business cycle forecasts. Using a Bidirectional Encoder Representations from Transformers (BERT) model, I quantify 19,300 paragraphs from German business cycle reports (1998-2021) and classify the signs of institutes’ consumption forecast errors. The correlation is strong for 12.8% of paragraphs with a predicted class probability of 85% or higher. Reviewing 150 of such high-probability paragraphs reveals recurring narratives. Underestimations of consumption growth often mention rising employment, increasing wages and transfer payments, low inflation, decreasing taxes, crisis-related fiscal support, and reduced relevance of marginal employment. Conversely, overestimated consumption forecasts present opposing narratives. Forecasters appear to particularly underestimate these factors when they disproportionately affect low-income households.
2023-07Diskussionspapier
Quantifying Priorities in Business Cycle Reports: Analysis of Recurring Textual Patterns around Peaks and Troughs
(Philosophische Fakultät) Foltas, Alexander
I propose a novel approach to uncover business cycle reports’ priorities and relate them to economic fluctuations. To this end, I leverage quantitative business-cycle forecasts published by leading German economic research institutes since 1970 to estimate the proportions of latent topics in associated business cycle reports. I then employ a supervised approach to aggregate topics with similar themes, thus revealing the proportions of broader macroeconomic subjects. I obtain measures of forecasters’ subject priorities by extracting the subject proportions’ cyclic components. Correlating these priorities with key macroeconomic variables reveals consistent priority patterns throughout economic peaks and troughs. The forecasters prioritize inflation-related matters over recession-related considerations around peaks. This finding suggests that forecasters underestimate growth and overestimate inflation risks during contractive monetary policies, which might explain their failure to predict recessions. Around troughs, forecasters prioritize investment matters, potentially suggesting a better understanding of macroeconomic developments during those periods compared to peaks.
2023-07Diskussionspapier
Firm Expectations and News: Micro v Macro
(Philosophische Fakultät) Born, Benjamin; Enders, Zeno; Menkhoff, Manuel; Müller, Gernot; Niemann, Knut
Using firm-level data, we study how firm expectations adjust to news while accounting for a) the heterogeneity of news and b) the heterogeneity of firms. We classify news as either micro or macro, that is, information about firm-specific developments or information about the aggregate economy. Survey data for German and Italian firms allows us to reject rational expectations: Both types of news predict forecast errors at the firm level. Yet while firm expectations overreact to micro news, they underreact to macro news. We propose a general-equilibrium model where firms suffer from ‘island illusion’ to explain these patterns in the data.
2023-06Diskussionspapier
On FIRE, news, and expectations
(Philosophische Fakultät) Born, Benjamin; Enders, Zeno; Müller, Gernot J.
The full-information rational expectations (FIRE) assumption is at the core of modern macroeconomics. We revisit recent evidence which rejects FIRE based on survey data. It relates forecast errors to news at different levels of aggregation. The evidence based on consensus forecasts testifies against the full-information assumption, the evidence based on data for individual forecasters against rational expectations. In contrast to earlier survey evidence that was largely dismissed as irrelevant, the recent evidence is likely to have a lasting impact for two reasons. First, the global financial crisis of 2007/08 has led to a certain uneasiness with the state of macro and a readiness to embrace new ideas. Second, the recent literature has put forward a number of promising alternative models of the expectation-formation process. We review these at the end of the paper.
2023-05-10Diskussionspapier
Changing Forecasts - Forecasting Change
(Philosophische Fakultät) Knake, Sebastian
Since the late 1960s, the rising volatility of financial markets in the US has troubled econometricians and bank managers alike. Both professions have found it increasingly difficult to forecast savings deposit flows. This article explores these challenges by focusing on two developments. First, it explores the internal adjustment process among econometric models of the savings deposit market. To achieve this aim, I use the so-called FMP (MPS) macro model used by the Federal Reserve Board since 1970 and the deposit forecast model of the Philadelphia Saving Fund Society (PSFS), the oldest and largest savings bank in the US. I find that economists failed to find timeless determinants for the market for savings deposits, partly because the determinants of expectation formation of households kept changing. Instead, economists relied on a large number of time-dependent dummy variables. Second, the article shows how the conditions of the market for savings deposits shaped the demand for macroeconomic forecast models. Here, I again use PSFS as a case study. I show that the demand for econometric models in the banking industry skyrocketed in the 1970s but abated somewhat in the 1980s. While the rising volatility led bank managers to seek sophisticated tools to predict deposit flows, the deregulation of the banking industry and the accompanying change in customer behavior devalued macro models as a reliable forecast technique for individual banks. Instead, it became crucial for banks to predict the future behavior of competing institutions.
2023-04-12Diskussionspapier
The German Inflation Trauma
(Philosophische Fakultät) Teupe, Sebastian; Barkhausen, David
The notion of a nation-specific inflation trauma among the German population is ubiquitous in the public debate in Germany and beyond. Because of its experience with hyperinflation in 1923, the German population fears rising prices and favors stability-oriented monetary as well as fiscal policy. It is less clear, however, whether this contemporary understanding of the German inflation trauma is as old as its historical point of reference. The majority of the literature presumes that such a traumatic disposition has persisted since 1923 and has been transposed intergenerationally (persistence thesis). Others, however, point to an ex-ante reconstruction of past experiences (reconstruction thesis). By employing an interdisciplinary approach of methodological triangulation drawing on both methods of history and political sciences, we provide new insights on the question of origin. Specifically, we examine the remembrance of hyperinflation in personal memoirs and the German Bundestag in regard to the monetary and fiscal policy lessons connected to memories of 1923. Doing so, we find support for the logic of reconstruction. We show that the hyperinflation was not remembered unambiguously, and that memories were not immediately linked to specific policy lessons. Only from the 1980s onwards, a process of discursive alignment occurred that mirrors the contemporary understanding of the inflation trauma. By providing this insight, our paper allows to better understand the historical origins of today’s popular memory and its political uses.
2023-01Diskussionspapier
Testing for Differences in Survey-Based Density Expectations. A Compositional Data Approach
(Philosophische Fakultät) Dovern, Jonas; Glas, Alexander; Kenny, Geoff
We propose to treat survey-based density expectations as compositional data when testing either for heterogeneity in density forecasts across different groups of agents or for changes over time. Monte Carlo simulations show that the proposed test has more power relative to both a bootstrap approach based on the KLIC and an approach which involves multiple testing for differences of individual parts of the density. In addition, the test is computaionally much faster than the KLIC-based one, which relies on simulations, and allows for comparisons across multiple groups. Using density expectations from the ECB Survey of Professional Forecasters and the U.S. Survey of Consumer Expectations, we show the usefulness of the test in detecting possible changes in density expectations over time and across different types of forecasters.
2023-01Diskussionspapier
Eliciting Expectation Uncertainty from Private Households
(Philosophische Fakultät) Dovern, Jonas
Recently, much attention has been devoted to the measurement of macroeconomic (expectation) uncertainty and its impact on aggregate economic fluctuations. This paper presents a new qualitative measure of macroeconomic expectation uncertainty based on data from a German online survey of consumer expectations. I document that the survey design works well. Elicited expectation uncertainty is related to data volatility and conventional measures of uncertainty as expected. Its dependency on socioeconomic factors is in line with previous evidence based on quantitative uncertainty measures. The new measure offers a very efficient way of eliciting expectation uncertainty and can be used to obtain uncertainty measures on many different expectations at low cost.
2023-01Diskussionspapier
Experience Effects in Economics
(Philosophische Fakultät) Malmendier, Ulrike
2022-11Diskussionspapier
Risk Management, Expectations and Global Finance: The Case of Deutsche Bank 1970-1990
(Philosophische Fakultät) Nützenadel, Alexander
What impact do past experiences have on the expectation formation of banks? This article analyses the risk management of Germany’s largest bank during the 1970 and 1980s. In this period, financial deregulation and globalization increased the likelihood of credit defaults and forced banks to implement new strategies of risk assessment. The Herstatt failure of 1974 triggered a series of new regulations, partly based on initiatives of the banks themselves. After the sovereign debt crisis of the 1980s, banks introduced a comprehensive strategy of country-risk assessment. They systematically professionalized their information resources and integrated risk and liability management. Economic forecasting was often based on historical data used for the classification and diversification of risks. However, learning from past experiences had limitations, as recent events were often overrated. This had the effect that the banks’ country risk assessment focused mainly on developing countries while the industrial world was not included in the schemes. This might explain why many banks have continually underestimated the financial risks present in developed countries since the 1990s.
2022-10Diskussionspapier
Identity, Instability, and Investors. An Empirical Investigation of the Home Bias
(Philosophische Fakultät) Huning, Thilo Rene; Wahl, Fabian
In this paper, we present novel data from the German-speaking area on 13,422 venture capital investments between 1999 and 2019, and document a novel and yet unexplained contributor to investors’ home bias. We propose a new measure of regional identity based on a recent vehicle license plate liberalization in Germany, and leverage on a unique dataset of historical borders to show how regional identity is formed. We use an instrumental strategy to establish a causal link between historical political instability, regional identity, and the home bias. Our results indicate that a common regional identity is highly relevant for investment decisions.
2022-06Diskussionspapier
A mirror to the world. Taking the German News Magazine Der Spiegel into a Topic Modeling/Sentiment Perspective
(Philosophische Fakultät) Wehrheim, Lino
The importance of mass media is reflected, among other things, in the fact that their coverage on certain topics – contrary to findings from communication research – is often seen as a reflection of the topics that are discussed by society. In Germany, this can be observed especially for the news magazine Der Spiegel, whose self-declared claim is to “hold up a mirror to the world“. Accordingly, scholars from different disciplines frequently use its reporting, especially its cover stories, to support their own narratives, especially regarding general accounts on ‘the zeitgeist’. Based on this observation, I propose the following thought experiment: suppose we were to look not only at individual cover stories with their individual topics, but at all cover stories – which picture of German contemporary history would then emerge? To answer this question, I use methods from the digital humanities / digital history to retrieve the topics and tonality of all cover stories published between January 1947 and December 2017. This way, I identify the topics that have dominated the Spiegel’s front pages, which might be regarded as a trace or abbild of the narratives that shaped public discourse since the early days of the Federal Republic or even the zeitgeist itself.
2022-03Diskussionspapier
Heterogeneous Savers and their Inflation Expectation during German Industrialization: Social class, Wealth, and Gender
(Philosophische Fakultät) Lehmann-Hasemeyer, Sibylle; Neumayer, Andreas; Streb, Jochen
Using microeconomic data on 2,500 savers of the savings bank Ludwigsburg, we study individual savings behavior in 19th century-Germany. We show that wealthy savers responded to an increase in the expected inflation rate (and falling real interest rate) by increasing their savings, suggesting that they pursued a real saving target that could only be defended by saving more when investment conditions became adverse. Workers’ savings behavior changed over time. For a long time, poorer, often female, working-class savers were forced to reduce their savings in times of high prices because they had to spend most of their income on essential consumer goods. This changed in the 1880s, when the living conditions of the working class improved significantly due to rising real wages and greater social security. We therefore observe a structural break in the savings regime: the originally negative relationship between inflation expectations and savings was reversed into a positive one. Looking only at the aggregate may obscure the true motives and changes in behavior of heterogeneous savers.
2021-08Diskussionspapier
Optimism gone bad? The persistent effects of traumatic experiences on investment decisions
(Philosophische Fakultät) Kim, Chi Hyun
Do memories of highly emotional stock market crashes permanently affect the investment decisions of households? The Initial Public Offerings of Deutsche Telekom during 1996-2000 provide an optimal base to address this question, as it is known for its emotional character and is reputedly “the last time Germans invested in stocks.” Using Socio-Economic Panel (SOEP) household survey data, I show that having experienced this event leads to persistently lower stock market participation in the future. In addition, this effect is greater for households that had directly invested in Telekom shares, those being more likely to have high emotional experiences. Finally, I also show that such traumatic experiences on investment decisions have intergenerational consequences, significantly affecting how the next generation invests in the financial market.
2021-04Diskussionspapier
Turn, Turn, Turn. A Digital History of German Historiography, 1950-2019
(Philosophische Fakultät) Wehrheim, Lino; Jopp, Tobias A.; Spoerer, Mark
The increasing availability of digital text collections and the corresponding establishment of methods for computer-assisted analysis open up completely new perspectives on historical textual sources. In this paper, we use the possibilities of text mining to investigate the history of German historiography. The aim of the paper is to use topic models, i.e. methods of automated content analysis, to explore publication trends within German historiography since the end of World War II and, thus, to gain data-based insights into the history of the discipline. For this purpose, we evaluate a text corpus consisting of more than 9,000 articles from eleven leading historiographical journals. The following questions are addressed: (1) Which research subjects mattered, and in how far did this change over time? (2) In how far does this change reflect historiographical paradigm shifts, or 'turns'?(3) Do the data allow to map the emergence of these turns, i.e., can we periodize/historicize them? (4) Which of the proclaimed turns mattered in the sense that it is actually reflected in the research themes we find, and which turn does not?
2021-04-09Diskussionspapier
The Sound of Silence. On the (In)visibility of Economists in the Media
(Philosophische Fakultät) Wehrheim, Lino
One way for economists to influence economic policy and society as a whole is to shape what Robert Shiller has called “economic narratives”. This, in turn, puts the media in their role as professional storytellers in a central position. In this paper, I investigate how economists have been covered by the media in a long-term perspective. Particularly, I address two questions: How has the quantitative visibility of economists in the media developed over time? And how can news stories covering economists be characterized in terms of their content? I answer these questions in two steps. First, I provide a comparison of economists’ quantitative media visibility in international newspapers. Second, building on a corpus of more than 12,000 newspaper articles, I conduct a case study on the German Council of Economic Experts. Using various text mining approaches, I survey four features of newspaper coverage: topics, tonality, temporal perspective, and the role of individuals. Finally, based on extensive close reading, I briefly discuss two key turning points in the media history of economists, namely the 1980s and the late 1990s/early 2000s. The main finding is that economists have indeed become silent compared to their heyday of economic expertise in the 1960s, but that they have not been as silent as is often claimed.
2020-12Diskussionspapier
Expectation dispersion, uncertainty, and the reaction to news
(Philosophische Fakultät) Born, Benjamin; Dovern, Jonas; Enders, Zeno
Releases of key macroeconomic indicators are closely watched by financial markets. We investigate the role of expectation dispersion and economic uncertainty for the stock-market reaction to indicator releases. We find that the strength of the financial market response to news decreases with the preceding dispersion in expectations about the indicator value. Uncertainty, in contrast, increases the response. We rationalize our findings in a model of imperfect information. In the model, dispersion results from a perceived weak link between macroeconomic indicators and fundamentals that reduces the informational content of indicators, while higher fundamental uncertainty makes this informational content more valuable.
2020-12Diskussionspapier
Erwartungs(un)sicherheit durch Gerichte. Methoden und Chiffren der Justiz
(Philosophische Fakultät) Herget, Lukas; Pahlow, Louis
Nicht nur Politik und Gesetzgebung, sondern auch Gerichte greifen in die Spielregeln der Wirtschaft ein und definieren damit die Rahmenbedingungen der Marktakteure mit. Durch ihre Entscheidungen können sie die Erwartungen und damit das Handeln der Akteure signifikant beeinflussen und einerseits Handlungsräume eröffnen, andererseits aber auch gewohnte institutionelle settings in Frage stellen oder aufgeben. Diese Prozesse laufen auch unabhängig von Veränderungen des gesetzlichen Regelungsrahmens ab und sie sind keineswegs auf bestimmte Rechtsordnungen beschränkt. Gerichte können bestehendes Recht von tradierten Deutungen lösen und an sich ändernde ökonomische Rahmenbedingungen anpassen. Anhand dreier Fallstudien der deutschen und europäischen Zivilgerichtsbarkeit geht der Beitrag der Frage nach, wie Gerichte wirtschaftliche Erwartungs(un)sicherheit generiert und welche Methoden sie dafür genutzt haben.
2020-10Diskussionspapier
Diskurs, Narrativ, Sonderweg, Hitler, Turn. Konjunkturen geschichtswissenschaftlicher Begriffe im „Clio Viewer“
(Philosophische Fakultät) Wehrheim, Lino; Jopp, Tobias A.; Spoerer, Mark
Auf Anregung einer (nicht-repräsentativen) Twitter-Umfrage unter Historikerinnen und Historikern möchten wir in diesem Beitrag ein von uns zusammengetragenes Korpus an Aufsätzen aus elf geschichtswissenschaftlichen Fachjournalen vorstellen und anhand einiger Beispiele illustrieren, wie sich der Gebrauch verschiedener prägnanter geschichtswissenschaftlicher (Leit-) Begriffe seit 1950 verändert hat. Das Ziel ist nicht, eine „digitale Begriffsgeschichte“ verschiedener Begriffe vorzulegen oder gar Rückschlüsse auf die Entwicklung des Fachs zu ziehen. Vielmehr geht es uns darum, die vorgeschlagenen und um eigene Kandidaten ergänzten Begriffe und deren Konjunkturen zu präsentieren, um so eine Grundlage für eine weitergehende Diskussion digitalhistorischer Methoden und des Nutzens eines „Clio Viewers“ zu legen. Besonderes Augenmerk richten wir auf die Erörterung der mit dem Einsatz einfacher Stichwortsuchen verbundenen methodischen Fallstricke.

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