My Working Papers
Albrecht Ritschl
Professor of Economic History
London School of Economics

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(with Samad Sarferaz) Crisis? What Crisis? Currency vs. Banking in the Financial Crisis of 1931, 2010
Bottomline: Banking crises played a major part in deepening the interwar depression. The German banking crisis of 1931 was a particularly big one. We find in a factor model that it has high explanatory power, not just for Germany but also for the U.S. In contrast, crisis transmission under the Gold Standard played only a minor role. And yes, monetary policy apparently didn't matter much (see also below).

(with Pooyan Amir-Ahmadi) Depression Econometrics: A FAVAR Model of Monetary Policy During the Great Depression, 2009 [first draft 2007]
Bottomline: We employ a Bayesian factor-augmented VAR to analyse monetary factors in the U.S. Great Depression. We identify shocks to the policy instruments in the VAR by sign restrictions. Their explanatory power for output is similar to the low values commonly found for the postwar period. We also employ Bayesian forecasting to measure the systematic component of policy, and find a moderate role for such effects. Our results suggest that the monetary channel played a nonzero but limited role in contributing to the Great Depression.

Bonus material: Appendix E (7 MB), not included in the paper.

War 2008 das neue 1931? Zwei Weltwirtschaftskrisen im Vergleich, 2009
Bottomline: This paper argues that the international banking crisis of 1931, not the stock market crash of 1929 is the proper comparison to 2008. In 1931, the gold standard collapsed, Germany (the third largest economy at the time) started going into debt default, and the international banking system suffered a severe crisis that was not resolved before 1933. Compared to this triple whammy and its fallout, the present crisis is still quite mild.

Spurious Significance of Treatment Effects in Overfitted Fixed Effect Models, 2009
Bottomline: Spurious significance of treatment effects in panel regressions may occur in overfitted FE and DiD modeling of within-group comparisons. Overfitting occurs if observation-specific individual fixed effects (IFE) are specified, although the comparison would be identified by group-specific fixed effects. Specifying an overfitted regression with IFE may seem innocuous, as the coefficient estimates on the treatment effect under both fixed effect specifications are identical. Moreover, standard software packages provide easy to use options for individual fixed effects, making an overfitted specification seem attractive. However, while the estimated treatment effect under IFE and FET is the same, its estimated standard error is not. Overfitting through IFE leads to spurious precision of the estimated treatment effect coefficient. The resulting bias is related to the reduction in the residual sum of squares induced by employing IFE instead of FET. Under ideal conditions where all other regressors are uncorrelated to the treatment and the fixed effects, this relation is strictly proportional.

(with Lars Boerner) The Economic History of Sovereignty: Communal Responsibility, the Extended Family, and the Firm, 2008
Bottomline: We argue that communal responsibility in medieval city-states created incentives for excessive risk-taking by individual merchants, and that the emergence of firms mitigated this problem. We also find that entity shielding in the sense of Hansmann, Krakman and Squire (2006) arose endogenously and is not primarily the result of regulation by local authorities.

(with Samad Sarferaz and Martin Uebele) Output and Consumption in the Global Business Cycle, 1870-2006: A Dynamic Factor Approach, 2008
Bottomline: We find that globalisation of business cycles has not increased since 1870. Patterns of regional integration have remained remarkably stable

(with Tobias Straumann) Business Cycles and Economic Policy, 1914-1945, 2008
A contribution to an economic handbook project edited by Broadberry and O'Rourke.
Bottomline: A Great Depression in Western Europe was under way since World War I. Most of this cannot be explained by money and banking troubles

(with Samad Sarferaz and Martin Uebele) The U.S. Business Cycle, 1865-1939: Dynamic Factor Analysis vs. Reconstructed National Accounts, 2008
Bottomline: We use Bayesian dynamic factor analysis to obtain a diffusion index of aggregate activity in the U.S. economy. It replicates the Great Moderation for the postwar period. In support of an argument made by Romer (1986, 1989) it also provides evidence that postwar volatility was at least as high or bigger than before 1913.

The Anglo-German Industrial Productivity Paradox, 1895-1938: A Restatement and a Possible Resolution, 2006
Bottomline: International benchmark comparisons and time series extrapolations of comparative Anglo-German productivity do not match well before World War I. However, the Anglo-German productivity paradox is not as bad as you think.

(with Lars Boerner): Making Financial Markets: Contract Enforcement, Matching, and the Emergence of Tradable Assets in Late Medieval Europe, 2005
Bottomline: Communal responsibility among medieval traders does great things when inserted into a matching model of money demand.

(with Martin Uebele): Business Cycles and Stock Market Comovement in Germany before World War I: Evidence from Spectral Analysis, 2005
Bottomline: Among several rivaling GNP estimates, pick the one that comoves best with the stock market, and find that this reestablishes the traditional NBER business cycle chronicle.

Lohnkonflikt und funktionale Einkommensverteilung in Deutschland im 20. Jahrhundert (Labor Conflict and the Functional Distribution of Income in 20th Century Germany), 2005
Bottomline: A brief, critical survey of the field. The popular idea that profit shares increased wildly during World War I is a myth. The labor share increased after 1918 and again in the 1960s, and remained mostly constant otherwise. The one big exception is the Nazi recovery. Everything that has ever been claimed about redistribution from labor to capital in World War I holds for the late 1930s and World War II.

Der lange Schatten Hjalmar Schachts: Zu den langfristigen Wirkungen des Dritten Reichs auf die Wirtschaftsordnung Deutschlands seit dem Kriege, 2005
Bottomline: A fresh look at continuities in German regulatory history suggests an unpleasant result: much of Germany's competition policy was shaped during the mid-1930s.

Der spaete Fluch des Dritten Reichs: Pfadabhaengigkeiten in der Entstehung der bundesdeutschen Wirtschaftsordnung, 2005
[this is a short version of the earlier "Von der Krise zur Moderne", see below].

How and When Did Germany Catch Up to Britain and the U.S.?, 2004
Bottomline: Use the right data on Germany and find a substantial productivity lead over Britain in industry before WWI, just as the older literature argued.

Spurious Growth in German Output Data, 1913-1938, 2004
Bottomline: Previous output estimates for Germany partly assume constant factor shares, which is problematic for the transition across World War I. A national accounting exercise.

The Pity of Peace: Germany’s Economy at War, 1914-1918 and Beyond, 2003
Bottomline: it was not inflationary war finance but declining output that brought Germany down in World War I.

Von der Krise zur Moderne? Zu den langfristigen Wirkungen der NS-Wirtschaftspolitik, 2003
Bottomline: Corporatist regulation imposed by the Nazis still strangles many sectors of the German economy. 

(with Niko Wolf) Endogeneity of Currency Areas and Trade Blocs: Evidence from the Inter-War Period, 2003
Bottomline: We find very large trade effects, but devise methods to show they're all endogenous.

Data download:     <Zipped Eviews file>
                                 <Zipped Excel files>
Rose's response:   <click here>
Our reply:               <click here>

Hat das Dritte Reich wirklich eine ordentliche Beschaeftgungspolitik betrieben?, 2002
Bottomline: Nazi work creation and deficit spending was much lower than you'd think. A version in English is below.

Knut Borchardts Interpretation der Weimarer Wirtschaft. Zur Geschichte und Wirkung einer wirtschaftsgeschichtlichen Kontroverse, 2002
Bottomline: Borchardt was right on Bruening's budget crisis of 1930-32, but maybe for slightly different reasons than he thought.

Modern Germany since 1815, 2002
A handbook article.

(with Ulrich Woitek ) Did Monetary Forces Cause the Great Depression? A Bayesian VAR Analysis for the U.S. Economy, 2001
Bottomline: we try hard but find no monetary effects. Leading indicators of investment do seem to play the trick.

Deficit Spending in the Nazi Recovery, 1933-1938: A Critical Reassessment, 2001
Bottomline: I examine lots of descriptive and VAR evidence in search of any effects, without finding much.

(with Barry Eichengreen) Winning the War, Losing the Peace? Britain’s Post-War Recovery in a West German Mirror, 1998
Bottomline: Germany's supergrowth was entirely a rebound effect. Britain grew slower but along a very similar steady state.

Sustainability of High Public Debt: what the Historical Record Shows, 1996
Bottomline: Shows, inter alia, that Germany's debt/income ratio has never fallen in peacetime. Predicts that stabilization will be hard. A descriptive comparative exercise in debt income ratios and inflation rates.

Was Schacht Right? Reparations, the Young Plan, and the Great Depression in Germany, 1995
Bottomline: Germany ignored the tighter terms of payment of the Young Plan of 1929. Schacht was a bad guy, but his warnings turned out to be true. The paper is a two-period model of bad incentives in paying back reparations.

An Exercise in Futility: East German Economic Growth and Decline, 1945-89, 1994
An analysis of growth and comparative productivity of the East German economy since 1945. Argues that half the productivity gap with West Germany originated during collectivization in the early post-war year.

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Albrecht Ritschl, 09 February 2010