ABOUT

The Macrohistory Lab Bonn is an active research hub in international macroeconomic and financial history.

We combine modern empirical macroeconomics with long-run historical data to address first order policy questions such as the growth of finance in advanced economies, the causes of financial instability and risk taking in the financial sector, as well as long-run trends in housing markets, historical forces in development processes, and the effects of international financial integration and capital flows.



The Lab is part of the Institute for Macroeconomics and Econometrics at the University of Bonn.

People



Prof. Dr. Moritz Schularick


University of Bonn

Website
eMail


Moritz Schularick
Felipe Valencia Caicedo


Universitat Pompeu Fabra

Website
eMail


Felipe Valencia Caicedo
Narly Dwarkasing


University of Bonn

Website
eMail


Narly Dwarkasing
Katharina Knoll


University of Bonn

CV
eMail


Katharina Knoll
Dmitry Kuvshinov


University of Bonn

CV
eMail


Dmitry Kuvshinov
Björn Richter


University of Frankfurt

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eMail


Björn Richter
Felix Ward


University of Bonn

CV
eMail


Felix Ward
Kaspar Zimmermann


University of Bonn

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eMail


Kaspar Zimmermann


COOPERATIONS



Òscar Jordà

Professor of Economics
University of California Davis
Website

Thomas Philippon

Professor of Finance
Stern School of Business
New York University
Website

Ariell Reshef

Assistant Professor of Economics
University of Virginia
Website

Thomas Steger

Professor of Economics
University of Leipzig
Website

Alan M. Taylor

Professor of Economics
University of California Davis
Website

Christoph Trebesch

Assistant Professor of Economics
University of Munich
Website

Projects



Financialization–History, Economics, Politics

The widely held belief that financial deepening benefits the economy by efficiently allocating capital and diversifying risk was shaken to its core by the breadth and scope of the 2008/09 financial crisis. This research project combines 140 years of economic history with state-of-the-art econometric methods to gain new insights into the relationship between finance, growth and crises.

People:
Òscar Jordà
Moritz Schularick
Thomas Steger
Alan M. Taylor
Felix Ward

Research:
Staatsschulden
Spotting the Danger Zone
Public and Private Debt
Sovereigns versus Banks
Credit Booms Gone Bust
Public Debt and Financial Crises




Housing Markets in History

For economists there is no price like home—at least not since the global financial crisis. Fluctuations in house prices and their importance for the macroeconomy have become a rapidly expanding research field. The economic history of advanced economies is spattered with narratives about booms and busts in real estate prices. Yet we know surprisingly little about long-run trends and cycles in house prices. This research project aims to fill this void.

People:
Òscar Jordà
Katharina Knoll
Moritz Schularick
Thomas Steger
Alan M. Taylor

Research:
No Price Like Home: Global House Prices
The Great Mortgaging
Betting the House




Long-term Economic Persistence

Simply put, economic persistence examines the historical factors that affect economic performance today. As such, it combines insights from economic development, history and growth. Ultimately, it is a quest for the deep-rooted geographic, institutional, educational, genetic and cultural determinants of comparative economic development. This research project will emphasize the long-lasting legacy of colonialism with a special focus on Latin America.

People:
Felipe Valencia Caicedo

Research:
The Persistence of (Subnational) Fortune
The Mission: Economic Persistence, Human Capital Transmission and Culture in South America




Size of Finance

In the years prior to the recent financial crisis, wages and value added of the financial sector skyrocketed relative to the rest of the economy. This research project aims to provide new insights into the growth and change of the financial sector and to advance our understanding of common trends and differences across countries in its historical evolution. As a central part of the project, we construct a dataset to measure the contribution of the financial sector to GDP in advanced economies since 1870.

People:
Thomas Philippon
Ariell Reshef
Moritz Schularick
Kaspar Zimmermann




Events



Winter Term 2015/16
Seminar Series

Past Events
30.4.2015

MEF-Seminar
University of Bonn

Erik Hornung, MPI Munich

From Serfdom to Freedom: The Economic Origins of the Emancipation of Labor

Website
12.–13.6.2015

Conference
German Historical Institute, Washington DC

Financialization–A New Chapter in the History of Capitalism

Website
24.6.2015

Symposium
Bundesbank, Frankfurt/M.

Debt–Economic, Political and Moral Consequences

Website
25.6.2015

MEF-Seminar
University of Bonn

James Fenske, University of Oxford

1807: Economic Shocks, Conflict and the Slave Trade

Website
25.6.2015

Finance and Insurance Seminar
University of Bonn

Dirk Bezemer, University of Groningen

A Global House of Debt Effect? Mortgages and Post-Crisis Recessions in Fifty Economies

Website
8.7.2015

Workshop
Bundesbank, Frankfurt/M.

Central Banks and Crises - Historical Perspectives

Website
16.7.2015

Special Workshop
University of Bonn

Katharina Mühlhoff, University of Mannheim

Darwin beats Malthus – Evolutionary Anthropology, Medical Progress and the Demographic Transition

22.10.2015

Macrohistory-Seminar
University of Bonn



Schmölders Preis des Vereins für Socialpolitik
Award

Moritz Schularick was awarded the
2015 “Schmölders Preis des Vereins für Socialpolitik”
29.10.2015

MEF-Seminar
University of Bonn

Luc Laeven, European Central Bank
29.10.2015

Macrohistory-Seminar
University of Bonn

Kirill Shakhnov, European University Institute

The Allocation of Talent: Finance Versus Entrepreneurship

Website
5.11.2015

Macrohistory-Seminar
University of Bonn

12.11.2015

Macrohistory-Seminar
University of Bonn

Olivier Accominotti, London School of Economics

Website
19.11.2015

Macrohistory-Seminar
University of Bonn

Christopher M. Meissner, UC Davis

Fiscal and Financial Crises

Website
3.12.2015

Macrohistory-Seminar
University of Bonn

Silvia Miranda Agrippino, Bank of England

Unsurprising Shocks: Measuring Responses to Monetary Announcements using High-Frequency Data
10.12.2015

Macrohistory-Seminar
University of Bonn

Carlos Alvarez Nogal, Universidad Carlos III de Madrid

Website
17.12.2015

Macrohistory-Seminar
University of Bonn

Mohamed Saleh, TSE, Toulouse

Website
14.1.2016

Macrohistory-Seminar
University of Bonn

Francesco Cinnirella, ifo Institut

Website
21.1.2016

Macrohistory-Seminar
University of Bonn

Faustine Perrin, Lund University

Website
11.2.2016

Macrohistory-Seminar
University of Bonn

Bernhard Winkler, European Central Bank

Website

Research



Leveraged Bubbles

Òscar Jordá
Moritz Schularick
Alan Taylor

   PDF

What risks do asset price bubbles pose for the economy? This paper studies bubbles in housing and equity markets in 17 countries over the past 140 years. History shows that not all bubbles are alike. Some have enormous costs for the economy, while others blow over. We demonstrate that what makes some bubbles more dangerous than others is credit. When fueled by credit booms, asset price bubbles increase financial crisis risks; upon collapse they tend to be followed by deeper recessions and slower recoveries. Credit-financed housing price bubbles have emerged as a particularly dangerous phenomenon.

▹ Summary on VoxEU

Staatsschulden: Ursachen, Wirkungen und Grenzen

Moritz Schularick
Carl-Ludwig Holtfrerich
Lars P. Feld
Werner Heun
Gerhard Illing
Gebhard Kirchgässner
Jürgen Kocka
Wolfgang Streeck
Uwe Wagschal
Stefanie Walter
Carl Christian von Weizsäcker

   PDF

Seit der schweren Finanz- und Wirtschaftskrise 2007/2008, der Verankerung der Schuldenbremse im Grundgesetz der Bundesrepublik Deutschland 2009 und der Schuldenkrise einiger Eurostaaten seit 2010 wird das schon lange virulente Streitthema „Staatsschulden“ in der öffentlichen Debatte noch intensiver diskutiert. Wissenschaftlerinnen und Wissenschaftler, die mehrheitlich der Leopoldina, acatech und den in der Akademienunion zusammengeschlossenen Wissenschaftsakademien angehören, geben darin Antworten auf grundsätzliche Fragen der Staatsverschuldung. Sie wollen damit zur Versachlichung der oft auch emotional geführten Diskussion beitragen.


Betting the House

Moritz Schularick
Òscar Jordà
Alan Taylor

Journal of International Economics (forthcoming)

   PDF

Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We use novel instrumental variable local projection methods to demonstrate that loose monetary conditions lead to booms in real estate lending and house prices bubbles; these, in turn, materially heighten the risk of financial crises. Both effects have become stronger in the postwar era.

Reactions: Financial Times, FAZ, Focus


The Mission: Economic Persistence, Human Capital Transmission and Culture in South America

Felipe Valencia Caicedo

Job Market Paper

   PDF

This article examines the long-term consequences of a historical human capital intervention. The Jesuit order founded religious missions amongst the Guarani, in modern-day Argentina, Brazil, and Paraguay. Missionaries instructed indigenous inhabitants in reading, writing and various crafts, before their expulsion in 1767. Using archival records and municipal census data, I demonstrate that educational attainment was and remains higher after 250 years in areas of former Jesuit presence. These differences also translate into 10% higher incomes. The effect of Jesuit missions emerges clearly after comparing them with abandoned Jesuit missions, Franciscan Guarani Missions and using an Instrumental Variables strategy. In addition, I collect survey data and conduct behavioral experiments, finding that respondents in missionary areas exhibit higher non-cognitive abilities and collaborative behavior. Such enduring differences are consistent with transmission mechanisms of occupational persistence, inter-generational knowledge transmission and indigenous assimilation. Robustness checks suggest that the results are not driven by migration, urbanization and tourism.


Spotting the Danger Zone: Forecasting Financial Crises with Classification Tree Ensembles and Many Predictors

Felix Ward

Bonn Econ Discussion Paper 01/2014

   PDF

To improve the detection of the economic ”danger zones” from which severe banking crises emanate, this paper introduces classification tree ensembles to the banking crisis forecasting literature. I show that their out-of-sample performance in forecasting binary banking crisis indicators surpasses current best-practice early warning systems based on logit models by a substantial margin. I obtain this result on the basis of one long-run- (1870-2011), as well as two broad post-1970 macroeconomic panel datasets. I particularly show that two marked improvements in forecasting performance result from the combination of many classification trees into an ensemble, and the use of many predictors.


No Price Like Home: Global House Prices, 1870-2012

Moritz Schularick
Katharina Knoll
Thomas Steger

CEPR Working Paper 10166

   PDF

How have house prices evolved in the long-run? This paper presents annual house price indices for 14 advanced economies since 1870. Based on extensive data collection, we are able to show for the first time that house prices in most industrial economies stayed constant in real terms from the 19th to the mid-20th century, but rose sharply in recent decades. Land prices, not construction costs, hold the key to understanding the trajectory of house prices in the long-run.

▹ Summary on VoxEU

Reactions: Financial Times, FAZ, Süddeutsche Zeitung, Sonntagszeitung (CH)


The Great Mortgaging

Moritz Schularick
Òscar Jordà
Alan Taylor

NBER Working Paper 20501

   PDF

This paper unveils a new resource for macro-economic research: a long-run dataset covering disaggregated bank credit for 17 advanced economies since 1870. The new data show that the share of mortgages on banks’ balance sheets doubled in the course of the 20th century, driven by a sharp rise of mortgage lending to households. Household debt to asset ratios have risen substantially in many countries. Financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries. Housing finance has come to play a central role in the modern macroeconomy.

▹ San Francisco Fed Economic Letter
▹ Summary on VoxEU

Reactions: New York Times, Financial Times, The Times, The Economist


Engineers, Innovative Capacity and Development in the Americas

Felipe Valencia Caicedo
William F. Maloney

Documento CEDE
World Bank Policy Research Working Paper

   PDF

Using newly collected national and sub-national data and historical case studies, this paper argues that differences in innovative capacity, captured by the density of engineers at the dawn of the Second Industrial Revolution, are important to explaining present income differences, and, in particular, the poor performance of Latin America relative to North America. This remains the case after controlling for literacy, other higher order human capital, such as lawyers, as well as demand side elements that might be confounded with engineering. The analysis then finds that agglomeration, certain geographical fundamentals, and extractive institutions such as slavery affect innovative capacity. However, a large effect associated with being a Spanish colony remains suggesting important inherited factors.


Monetary Conditions and Bank Loan Risk Taking: Evidence From the North and South Wales Bank, 1881-1894

Narly Dwarkasing

Job Market Paper

   PDF

I investigate the effects of the monetary rate, the interest rate set by the Central Bank, on bank risk taking by examining a sample of loan contracts secured by shares and extended by the North and South Wales Bank between 1881 and 1894. Collateralization by shares allows me to construct a measure of ex ante risk taking for each loan: the collateral value to loan amount ratio. Exploiting the fact that Britain was on the Gold Standard at that period in time allows me to address possible endogeneity issues. I use the number of gold rushes in a year as an instrumental variable for the monetary rate, by arguing that an unexpected windfall in the gold supply serves as an exogenous shock to the money supply, translating to a cut in the monetary rate. Results are consistent with theories indicating that low Central Bank interest rates can induce bank loan risk taking in the search for yields, as I find that collateral value to loan ratios are lowered following a cut in the monetary rate. I also find that low monetary rates corresponded with, on average, lower loan prices.


Public and Private Debt: The Historical Record (1870–2010)

Moritz Schularick

German Economic Review (2013)

   PDF

In this study, I draw on recent comparative studies of the macroeconomic history of advanced economies since 1870. I show that while both public and private debts have increased markedly, private, not public debts have climbed to historically unprecedented levels. Outside war times, financial crises have typically originated in the private sector, yet the costs have increasingly been socialized. The historical record shows that modern democracies have been relatively successful in managing their financial affairs, evidenced by a systematically positive response of primary balances to high debt ratios.


The Persistence of (Subnational) Fortune

Felipe Valencia Caicedo
William F. Maloney

World Bank Policy Research Working Paper
Documento CEDE

   PDF

Using subnational historical data, this paper establishes the within country persistence of economic activity in the New World over the last half millennium, a period including the trauma of the European colonization, the decimation of the native populations, and the imposition of potentially growth inhibiting institutions. We construct a data set incorporating measures of pre-colonial population density, new measures of present regional per capita income and population, and a comprehensive set of locational fundamentals. These fundamentals are shown to have explanatory power: native populations throughout the hemisphere were found in more livable and productive places. We then show that high pre-colonial density areas tend to be dense today: population agglomerations persist. The data and historical evidence suggest this is due partly to locational fundamentals, but also to classic agglomeration e.ffects: colonialists established settlements near existing native populations for reasons of labor, trade, knowledge and defense. The paper then shows that high density historically prosperous) areas also tend to have higher incomes today, and largely due to agglomeration effects: fortune persists for the United States and most of Latin America.


Sovereigns versus Banks

Moritz Schularick
Òscar Jordà
Alan Taylor

Journal of the European Economic Association (forthcoming)

   PDF

This paper studies the co-evolution of public and private sector debt in advanced countries since 1870. We find that in advanced economies financial stability risks have come from private sector credit booms and not from the expansion of public debt. However, we find evidence that high levels of public debt have tended to exacerbate the effects of private sector deleveraging after crises, leading to more prolonged periods of economic depression. Fiscal space appears to be a constraint in the aftermath of a crisis, then and now.

▹ Summary on VoxEU


Household Debt and Economic Recovery: Evidence from the U.S. Great Depression

Katharina Knoll

EHES Working Paper 36

   PDF

The Great Recession has focused renewed attention on the role of household leverage in the business cycle. Household debt overhang and the ensuing process of deleveraging are often cited as factors holding back economic recovery. This paper studies the relationship between household debt and economic performance during the Great Depression in the U.S. on the state level. Using a newly compiled dataset, I present evidence that debt overhang in the household sector acted as a severe drag on economic recovery in the 1930s. States with higher initial debt-to-income ratios recovered considerably slower. These findings point toward a close link between the accumulation of debt and the severity and duration of recessions.


From Competition to Cartel: Bank Mergers in the U.K. 1885 to 1925

Narly Dwarkasing
Fabio Braggion
Lyndon Moore

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We study the effects of bank mergers and acquisitions in the U.K from 1885 to 1925. The lack of a regulatory authority and the confidential nature of merger negotiations allows us to precisely measure the wealth effects of M&As in a laissez-faire environment. We find positive wealth effects for bidders (0.7%-1%) and targets (6.7%-8%) over the announcement month. When takeovers took place in a competitive environment wealth creation appears to be related to efficiency gains. As competition decreased, gains to shareholders appear to be related to increased oligopoly power. In a less competitve environment, banks tended to reduce the amount of loans and increase their holdings of safe marketable securities. Banks with higher charter value displayed higher capital ratios.


White Picket Finance: The Remaking of the U.S. Mortgage Market, 1932-1960

Katharina Knoll

in: Hubert Bonin, Niels-Viggo Haueter, Alfredo Gigliobianco, and Harold James (ed.) Public Policies and the Direction of Financial Flows, Bucharest 2012

   PDF

This paper tracks the history of government intervention in the U.S. mortgage market between 1932 and the 1960s, a period in which the system for housing finance underwent a fundamental transformation. Whereas prior to 1930 the government had little involvement in the mortgage market, by the 1960s it was a major player. These interventions were triggered in part by economic crises, particularly the Great Depression. Yet, as I argue in this paper, they were also motivated by a cultural understanding of homeownership as central to American identity and the rise of housing policy as a substitute for other forms of social assistance. Many of the instruments established during these years to direct the flow of credit toward housing would emerge as central features of the housing market that persist to the present day. These policies mark the beginning of the permanent subsidisation of residential mortgage credit. In addition, beyond introducing long-term debt instruments to the consumer, they fostered the depersonalisation of credit relations. In this way, I also show that some of the weaknesses that have contributed to current U.S. housingmarket woes found their inception in the policy responses to the Great Depression.


Credit Booms Gone Bust

Moritz Schularick
Alan Taylor

American Economic Review (2012)

   PDF

We study the behavior of money, credit, and macroeconomic indicators over the long run based on a new historical dataset for 14 countries over the years 1870-2008. Total credit has increased strongly relative to output and money in the second half of the twentieth century. Credit growth is a powerful predictor of financial crises, suggesting that policymakers ignore credit at their peril.

▹ Dataset
▹ Summary on VoxEU

Reactions: Financial Times; FAZ: here and here; Süddeutsche Zeitung; Handelsblatt


Public Debt and Financial Crises in the Twentieth Century

Moritz Schularick

European Review of History (2012)

   PDF

The costs of wars have been the main driver of public debt in the Western World during the modern era. The late twentieth century stands out as a period that saw a pronounced increase of government debt to GDP ratios in peacetime. This paper assesses the role that financial crises have played in shaping the public debt trajectory in the twentieth century.


Contact Us

Mailing Address — Institute for Macroeconomics and Econometrics, University of Bonn, Adenauerallee 24 – 42, 53113 Bonn, Germany

Where to find us — Institute for Macroeconomics and Econometrics, University of Bonn, Kaiserplatz 7-9, 4th floor, 53113 Bonn, Germany

econhistory@uni-bonn.de