Working Paper Series

The Working Papers of the Priority Programme 1859 "Experience and Expectation" are published in co-operation with the documentation and publication servers of Humboldt University (

ISSN: 2510-053X


No 12:

Meyer, Josefin / Reinhart, Carmen / Trebesch, Christoph (2019): Sovereign Bonds since Waterloo. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 12 (October), Berlin

This paper studies external sovereign bonds as an asset class. We compile a new database of 220,000 monthly prices of foreign-currency government bonds traded in London and New York between 1815 (the Battle of Waterloo) and 2016, covering 91 countries. Our main insight is that, as in equity markets, the returns on external sovereign bonds have been sufficiently high to compensate for risk. Real ex-post returns averaged 7% annually across two centuries, including default episodes, major wars, and global crises. This represents an excess return of around 4% above US or UK government bonds, which is comparable to stocks and outperforms corporate bonds. The observed returns are hard to reconcile with canonical theoretical models and with the degree of credit risk in this market, as measured by historical default and recovery rates. Based on our archive of more than 300 sovereign debt restructurings since 1815, we show that full repudiation is rare; the median haircut is below 50%.


No. 11:

Horn, Sebastian / Reinhart, Carmen / Trebesch, Christoph (2019): China’s Overseas Lending. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 11 (September), Berlin

Compared with China’s dominance in world trade, its expanding role in global finance is poorly documented and understood. Over the past decades, China has exported record amounts of capital to the rest of the world. Many of these financial flows are not reported to the IMF, the BIS or the World Bank. “Hidden debts” to China are especially significant for about three dozen developing countries, and distort the risk assessment in both policy surveillance and the market pricing of sovereign debt. We establish the size, destination, and characteristics of China’s overseas lending. We identify three key distinguishing features. First, almost all of China’s lending and investment abroad is official. As a result, the standard “push” and “pull” drivers of private cross-border flows do not play the same role in this case. Second, the documentation of China’s capital exports is (at best) opaque. China does not report on its official lending and there is no comprehensive standardized data on Chinese overseas debt stocks and flows. Third, the type of flows is tailored by recipient. Advanced and higher middle-income countries tend to receive portfolio debt flows, via sovereign bond purchases of the People’s Bank of China. Lower income developing economies mostly receive direct loans from China’s state-owned banks, often at market rates and backed by collateral such as oil. Our new dataset covers a total of 1,974 Chinese loans and 2,947 Chinese grants to 152 countries from 1949 to 2017. We find that about one half of China’s overseas loans to the developing world are “hidden”.


No 10:

Enders, Zeno / Hünnekes, Franziska / Müller, Gernot J. (2019): Monetary Policy Announcements and Expectations: Evidence from German Firms. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 10 (September), Berlin

We assess empirically whether monetary policy announcements impact firm expectations. Two features of our data set are key. First, we rely on a Survey of production and price expectations of German firms, that is, expectations of actual price setters. Second, we observe the day on which firms submit their answers to the survey. We compare the responses of firms before and after monetary policy surprises and obtain two results. First, firm expectations respond to policy surprises. Second, the response becomes weaker as the surprise becomes bigger. A contractionary surprise of moderate size reduces firm expectations, while a moderate expansionary surprise raises them. Large surprises, both negative and positive, fail to alter expectations. Consistent with this result, we find that many of the ECB’s announcements of non-conventional policies did not affect expectations significantly. Overall, our results are consistent with the notion that monetary policy surprises generate an information effect which is endogenous to the size of the policy surprise.


No 9:

Behrens, Christoph (2019): Evaluating the Joint Efficiency of German Trade Forecasts. A nonparametric multivariate approach. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 9 (March), Berlin

I analyze the joint efficiency of export and import forecasts by leading economic research institutes for the years 1970 to 2017 for Germany in a multivariate setting.  To this end, I compute, in a first step, multivariate random forests in order to model links between forecast errors and a forecaster’s information set, consisting of several trade and other macroeconomic predictor variables. I use the Mahalanobis distance as performance criterion and, in a second step, permutation tests to check whether the Mahalanobis distance between the predicted  forecast errors for the trade forecasts and actual  forecast errors is significantly smaller than under the null hypothesis of forecast efficiency. I find evidence for joint forecast inefficiency for two forecasters, however, for one forecaster I cannot reject joint forecast efficiency. For the other forecasters, joint forecast efficiency depends on the examined forecast horizon. I find evidence that real macroeconomic variables as opposed to trade variables are inefficiently included in the analyzed trade forecasts. Finally, I compile a joint efficiency ranking of the forecasters.


No 8:

Lehmann-Hasemeyer, Sibylle/Neumayer, Andreas (2018): The persistence of ownership inequality. Investors on the German stock exchanges, 1869 – 1945. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 8 (October), Berlin

We study the ownership structure of joint-stock firms for the period of 1869 to 1945 based on a unique hand-collected data set. The data covers a selection of 785 general meetings of 276 firms, including details of more than 10,000 investors. We show that after the hyperinflation of 1923, when shares became cheaper, the ownership share among lower social classes rose significantly. Moreover, with the rise of women rights after 1919, the number of shares owned by women also increased significantly. However, despite these shifts, the majority of shares remained in the hands of institutional investors and investors from the upper class, who mainly constituted and controlled the general meetings. Thus, despite the increased participation of women and the lower social classes, a stark inequality of opportunities persisted.


No 7:

Lehmann-Hasemeyer, Sibylle/Streb, Jochen (2018): Discrimination against Foreigners. The Wuerttemberg Patent Law in Administrative Practice. Working Papers of the Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour" No 7 (September), Berlin

Economists stress the leading role that inclusive institutions play among the various factors that foster a country’s economic growth. In this article, we show that it might be misleading to mistake the codification of a formal rule for its effective administrative implementation. As the case of the German state Wuerttemberg demonstrates, a government’s lip service to the principle of equal treatment does not guarantee that the local patent authority refrains from discriminating against foreign patentees by charging comparatively high patent fees. We conclude that the introduction of a stringent and formally fair patent law alone does not guarantee that foreign inventors’ intellectual property rights are protected as well as those of the domestic patentees.


No 6:

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

(Revise and Resubmit at Explorations in Economic History)

A regime shift towards increased inflation expectations is credited with jumpstarting the recovery from the Great Depression in the United States. Germany experienced a recovery as fast and strong in the 1930s. What role did inflation expectations play at the start of this remarkable economic upturn? To answer this question, we study inflation expectations in Germany across two different methods: we conduct a narrative study of media sources and estimate inflation expectations from a FAVAR model. Consistently across these approaches, we do not find a shift to increased expected inflation. This recovery was different, and its causes lie elsewhere.


No 5:

Priddat, Birger P. (2018): Erfahrung und Erwartung als Konstituenten von Erwartungen im ökonomischen Kontext. Working Papers of the Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour" No 5 (March), Berlin

Über die Zukunft wissen wir nichts. Keynes’ Diktum gilt weiterhin, obschon wir vielfältigst prognostizieren. Dabei aber rekurrieren wir systematisch und statistisch auf alte Datenmuster und Erinnerungen. Erfahrungen bilden die Basis der Projektionen auf die Zukunft. Die Qualität der Erfahrungen ist prüfen, um über Erwartungen einigermaßen valide Aussagen zu machen. Beide - Erfahrungen wie Erwartungen – bilden ein Komplementärtheorem. So wie die Erwartungen als Fiktionen decodiert werden, so dann auch die Erfahrungen als je gegenwärtige Zurechtlegungen. In volatileren Welten entwerten die Erfahrungen und die Erwartungen müssen sich Narrative zulegen, die nicht mehr notwendig erfahrungsgekoppelt sind.


No 4:

Daniel, Volker/Neubert, Magnus/Orban, Agnes (2018): 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

We study the role of global media during the Greek debt crisis and relate it to the transmission of events on financial actors' expectations. To identify news coverage about the Greek debt crisis, we apply topic modeling to a newly compiled dataset of over 430,000 articles from The International New York Times and Financial Times from 2009 to 2015. We identify a Greek debt crisis topic and relate it to events concerning Greece during this time period. Our finding is that events are only relevant for financial markets when they are covered in the media, whereas events without media coverage have no effect. News coverage without immediate events is equally irrelevant for financial markets.


No 3:

Lenel, Laetitia (2018): Futurama. Business Forecasting and the Dynamics of Capitalism in the Interwar Period. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 3 (January), Berlin

The recognition of the key importance of economic stability after World War I sparked interest in business forecasting on both sides of the Atlantic. This article explores the creation and the rapid international and domestic dissemination of the Harvard Index of General Business Conditions in the early 1920s, which contemporaries celebrated as the first “scientific” approach to business forecasting. Drawing on multi-site archival research, the paper analyses the extension of the index by an information-exchange-based method in the 1920s and traces its influence on the survey-based forecasting approach employed by American companies in the 1930s. Engaging with the current debate on the temporal order of capitalism, the article argues that business forecasting was not only a means of stabilizing capitalism, but a factor and an indicator of a change in the dynamics of capitalism in the interwar period.


No 2:

Döpke, Jörg/Fritsche, Ulrich/Waldhof, Gabi (2017): Theories, techniques and the formation of German business cycle forecasts. Evidence from a survey among professional forecasters. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 2 (July), Berlin

The paper reports results of a survey among active forecasters of the German business cycle. Relying on 82 respondents from 37 different institutions, we investigate what models and theories forecasters subscribe to and find that they are pronounced conservative in the sense, that they overwhelmingly rely on methods and theories that have been well-established for a long time, while more recent approaches are relatively unimportant for the practice of business cycle forecasting. DSGE models are mostly used in public institutions. In line with findings in the literature there are tendencies of “leaning towards consensus” (especially for public institutions) and “sticky adjustment of forecasts” with regard to new information. We find little evidence that the behaviour of forecasters has changed fundamentally since the Great Recession but there are signs that forecast errors are evaluated more carefully. Also, a stable relationship between preferred theories and methods and forecast accuracy cannot be established.


No 1:

Lehmann-Hasemeyer, Sibylle/Streb, Jochen (2016): Does Social Security Crowd Out Private Savings? The Case of Bismarck’s System of Social Insurance. Working Papers of the Priority Programme 1859 “Experience and Expectation. Historical Foundations of Economic Behaviour” No 1 (September), Berlin

Imperial chancellor Bismarck’s system of social insurance (with its three pillars health, accident and pension insurance) was an important role model for social security systems across Europe and in the US. How the introduction of the German system changed economic expectations and decisions of the German workforce has not been researched, though. This article tries to close this gap by analyzing the development of Prussian savings banks’ deposits in the late 19th century. The introduction of social security can affect private savings in at least two different ways: on the one hand, it might induce households to reduce their precautionary savings; one the other hand, it might give people a reason to reflect on their financial needs at old age or when sick, thereby increasing their motivation to accumulate private savings. To identify the causal effect of social insurance on private savings in Prussia, we employ a difference-in-difference-like approach. We show that, in our example, social security crowded out private savings considerably.