The Debt-Inflation Channel of the German (Hyper)Inflation
Name
brunnermeier-et-al-2025-the-debt-inflation-channel-of-the-german-(hyper)inflation.pdf
Description
Published version
Size
1016.17 KB
Format
Adobe PDF
Checksum (MD5)
424ca042c440727cb36bb0c5c9435712
Author(s)
Brunnermeier, Markus
Correia, Sergio
Luck, Stephan
Verner, Emil
Zimmermann, Tom
Date Issued
July 2025
Journal
American Economic Review
Publisher
American Economic Association
Citation
Brunnermeier, Markus, Sergio Correia, Stephan Luck, Emil Verner, and Tom Zimmermann. 2025. "The Debt-Inflation Channel of the German (Hyper) Inflation." American Economic Review 115 (7): 2111–50.
Version
Final published version
Abstract
This paper studies how a large increase in the price level is transmitted to the real economy through firm balance sheets. Using newly digitized macro- and micro-level data from the German inflation of 1919–1923, we show inflation led to a large reduction in real debt burdens and bankruptcies. Firms with higher nominal liabilities at the onset of inflation experienced a larger decline in interest expenses, a relative increase in their equity values, and higher employment during the inflation. The results are consistent with real effects of a debt-inflation channel that operates even when prices and wages are flexible. (JEL D22, E23, E31, G32, N14, N24)
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
10.1257/aer.20230685
