Great Expectations? Germany's Recovery from the Great Depression, 1932-1936

Prof. Dr. Philip Jung, Dortmund (Principal Investigator)

Prof. Dr. Alexander Kriwoluzky, Halle a. d. S. (Principal Investigator)

Prof. Dr. Moritz Schularick, Bonn (Principal Investigator)

Volker Daniel, Halle a. d. S.

Hendrik Steinbrecher, Dortmund


The overarching objective of the proposed project is to describe and analyse the evolution of expectations about key macroeconomic variables in Germany between 1932 and 1934 and use these insights to evaluate their significance for the German recovery from the Great Depression in a structural macroeconomic model. We aim to assemble qualitative and quantitative evidence about the evolution of expectations at this critical juncture of German history and relate them to the cyclical profile of the recovery. Combining micro and macro evidence, the project necessitates extensive archival work that will be carried out by doctoral researchers working at the intersection of economic history and macroeconomics. Each part of the project requires some specialized skills provided by one of the collaborators. However, it is the interaction between the three parts of the project that will yield compelling bridges between economic history, macro-econometrics and macroeconomic theory.

The overall project consists of three parts that we discuss in greater detail below. The objective of the first part is to provide a detailed descriptive analysis of the German economy from 1925 to 1935 on a monthly frequency. For this purpose, we will digitize and analyse detailed sector-level data on output, wages, and prices from the Konjunkturstatistisches Handbuch of 1936. The statistical analysis will be based on novel time-series techniques to handle big data. The key output will be a much more granular understanding of the cyclical profile of the German recovery process.
The second part of the project focuses on the expectation formation of economic agents in Germany in the years 1932-34. Our aim is to extract detailed expectations on the micro-level from individual company archives as well as macro-level  expectations from the financial press, financial markets and forecasts from research institutes and business associations. This part forms the historical core of the research project. It will enable us to compare the results of the statistical analysis in the first part with qualitative and quantitative information about expectation formation of the historical economic agents. In the third part of the project, we will use the evidence from the first two parts to evaluate what role changing expectations played for the German recovery in the 1930’s. We will develop a structural dynamic macroeconomic model that integrates various explanations for the German recovery. We calibrate the model to the data and quantify the relative importance of different factors in accounting for the German recovery from 1932-1934.

Studying the role of expectations with the combined toolboxes of economic history, macroeconometrics and macroeconomic theory, our proposed project aims to constitute an integral part of the priority program. The proposed research agenda corresponds closely to the analysis of expectation formation in times of crisis as a central building block of the first thematic field of the priority program (“Financial institutions and markets”) as we aim to identify the prevailing narratives of economic actors and track their evolution in times of severe crisis.



Daniel, Volker/ter Steege, Lucas: Inflation Expectations and the Recovery from the Great Depression in Germany, Explorations in Economic History 75 (2020) Article 131305 (revised version; see also Working Paper Series of the SPP 1859, No 6)

Daniel, Volker (2019): Expectations and the Media in Times of Economic Crises: 3 Empirical Investigations Utilizing Text as Data, Halle/Salle University: Dissertation 

Daniel, Volker/Neubert, Magnus/Orban, Agnes: Fictional expectations and the global media in the Greek debt crisis: A topic modeling approach. Working Papers of the Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour" No 4 (March), Berlin (published in Jahrbuch für Wirtschaftsgeschichte/Economic History Yearbook 59 (2/2018), pp. 525–566)

Daniel, Volker/ter Steege, Lucas (2018): Inflation Expectations and the Recovery from the Great Depression in Germany. Working Papers of the Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour" No 6 (March), Berlin 

Daniel, Volker/Peters, Robert: Greece and the media – A qualitative assessment of the news impact on credit conditions in the Greek debt Crisis, in: Peters, Robert/Altmann, Philip (eds.), “Complexity and Truth”, Special Issue of the Journal of Sociocybernetics 01/2018, ISA RC51, pp. 69-99.