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The recent international financial crisis and the subsequent Great Recession has underlined the need to gain a better understanding of the linkages between financial factors and the real economy. The purpose of this paper is to explore the contributions of financial shocks to macroeconomic fluctuations in Denmark, USA and Canada over the past century.

The paper compiles a new data set with break-adjusted quarterly time series of real gross domestic product (GDP) and six other key macroeconomic indicators for the three countries since 1921. It then explores the time-variation of macro-financial linkages by estimating structural vector-autoregressive models separately for three sample periods: 1921-1949, 1950-1979 and 1980-2014.

For all three countries, there seems to have been a non-trivial contribution from financial shocks to volatility in output and unemployment in all sample periods, even in the period 1950-1979, which was characterised by tight regulation of the financial sector and widespread financial stability. These findings underscore the general importance of financial factors to macroeconomic fluctuations.

The paper is the first to offer regression-based estimates of quarterly real GDP for Denmark for 1921-1947. As a result, quarterly figures for real GDP are now available for Denmark for the entire period 1921-2014. Such long-span time series of quarterly real GDP do not exist for any other European countries.

The purpose of this study is to explore the impact of household leverage on consumption in Denmark during the Great Depression in the 1930s.

A range of consumption functions are estimated on the basis of household-level data from the Expenditure and Saving Survey of 1931.

The estimations show significant negative marginal effects of various measures of leverage on homeowners’ non-durable consumption. The magnitude of the estimated effects suggests that leverage contributed significantly to the economic downturn during the Great Depression by depressing consumer spending of homeowners.

Gross debt levels of homeowners are not only of direct importance for financial stability but also have implications for macroeconomic stability, which again might affect the stability of the financial system. These findings seem to be in line with the focus on household leverage in the macroprudential oversight performed by regulators and central banks in many countries.

This paper is the first study of the leverage channel in the private consumption function using household micro data from the Great Depression.

The purpose of this paper is to explore the impact of regulation on previously unregulated banks’ balance-sheet growth using the 1880 Danish Savings Bank Act as a natural experiment. With the Act, Danish savings banks became, for the first time, subject to regulation and supervision whereas commercial banks continued as unregulated institutions.

The main elements of the Act focussed on supervision and provisions to improve information transparency. The paper estimates the impact of the Act on the balance-sheet growth of Danish savings banks using bank-level panel data and a difference-in-differences approach.

The paper finds no indications that the Act had a negative effect on the balance-sheet growth of savings banks compared to commercial banks in the short run. Furthermore, there are indications of a positive effect after a couple of years. This suggests that regulation is not always a burden for the regulated institutions and might even have a positive impact on their business activity.

This paper is the first study using the introduction of banking supervision and regulation in the 1800s as a natural experiment to evaluate the causal effect of regulation on the balance-sheet growth of previously unregulated financial intermediaries.

Several genealogical databases are now publicly available on the Web. The information stored in such databases is not only of interest for genealogical research but might also be used in broader historical studies. As a case study, this paper aims to explore what a crowdsourced genealogical online database can tell about income inequality in Denmark during the First World War.

The analysis is based on 55,000 family-level records on the payment of local income taxes in a major Danish provincial town (Esbjerg) from a publicly available database on the website of The Esbjerg City Archives combined with official statistics from Statistics Denmark.

Denmark saw a sharp increase in income inequality during the First World War. The analysis shows that the new riches during the First World War in a harbour city such as Esbjerg were not “goulash barons” or stock-market speculators but fishermen. There were no fishermen in the top 1per cent of the income distribution in 1913. In 1917, more than 37 per cent of the family heads in this part of the income distribution were fishermen.

The paper illustrates how large-scale microdata from publicly available genealogical Web databases might be used to gain new insights into broader historical issues.

The 1950s was characterised by pronounced stability of the banking sector in many countries, which the existing literature has attributed to tight regulation. However, other factors than regulation are important for financial stability. The purpose of this paper is to consider the case of Denmark and investigate whether the absence of banking crises was due to robustness of the banking sector’s customers rather than tight regulation.

The paper analyses the resilience of Danish wage and salary earners to adverse economic shocks in the 1950s based on household-level data on income, consumption, savings and wealth from the Danish Expenditure and Saving Survey of 1955.

The paper finds that the Danish household sector in the 1950s had a high debt payment ability and was very robust to even large income shocks. The results indicate that the stability of the Danish financial sector was not only due to tight regulation but also reflected a high credit quality of the banking sector’s loan portfolio.

During the past decade or so, a micro-data-based framework has become the “state of the art” approach among central banks to analyse the financial robustness of the household sector. However, such an approach has so far not been applied in studies on historical financial-stability issues. The paper adds to the literature by using granular household-level data to assess the financial resilience of the Danish household sector in the 1950s.

The Spanish Flu 1918–1920 saw a high degree of excess mortality among young and healthy adults. The purpose of this paper is a further exploration of the hypothesis that high mortality risk during The Spanish Flu in Copenhagen was associated with early life exposure to The Russian Flu 1889–1892.

Based on 37,000 individual-level death records in a new unique database from The Copenhagen City Archives combined with approximate cohort-specific population totals interpolated from official censuses of population, the author compiles monthly time series on all-cause mortality rates 1916–1922 in Copenhagen by gender and one-year birth cohorts. The author then analyses birth cohort effects on mortality risk during The Spanish Flu using regression analysis.

The author finds support for hypotheses relating early life exposure to The Russian Flu to mortality risk during The Spanish Flu. Some indications of possible gender heterogeneity during the first wave of The Spanish Flu – not found in previous studies – should be a topic for future research based on data from other countries.

Due to lack of individual-level death records with exact dates of birth and death, previous studies on The Spanish Flu in Denmark and many other countries have relied on data with lower birth cohort resolutions than the one-year birth cohorts used in this study. The analysis in this paper illustrates how archival Big Data can be used to gain new insights in studies on historical pandemics.

Empirical studies on household-level inflation inequality have so far only focused on periods with positive inflation rates. However, the major concern on the policy agenda since the most recent financial crisis has been deflation rather than inflation. This naturally raises the question regarding the effect of deflation on the distribution of real income when households spend their budget on different consumption bundles. This chapter compiles annual household-level inflation rates in Denmark from 1930 to 1935 based on microdata from the Expenditure and Saving Survey of 1931 and price data from the official Retail Price Index. The results indicate that lower-income households faced a larger decline in prices on their consumption of goods and services during the deflation years 1930–1932 than higher-income households did. The deflation thus contributed to narrowing the difference in real incomes between the top and bottom parts of the income distribution during the recession. In the years 1933–1935 with positive inflation rates, the lower-income households experienced higher inflation rates than higher-income households. Over the period 1930–1935 seen as a whole, the price development contributed slightly to reducing real income inequality. The low degree of medium-term persistence of differences in household-specific inflation rates is consistent with previous findings in various time periods from the 1960s to the 2000s without any persistent deflation events. The chapter at hand is the first empirical study of the direct distributional effects of price developments at the household level in a period with persistent deflation.

The purpose of this paper is to explore the extent of the so-called “small-sample problem” within quantitative exchange-rate risk management.

The authors take a closer look at the frequency distribution of nominal price changes in the European foreign exchange markets.

The analysis clearly illustrates the risk of seriously underestimating the probability and magnitude of tail events when frequency distributions are derived from fairly short data samples.

The authors suggest that financial institutions and regulators should have an eye for the long-term historical perspective when designing sensitivity tests or “worst case” scenarios in relation to risk assessments and stress tests.

The authors add to the literature by analysing the distribution of nominal exchange-rate fluctuations on the basis of a unique quarterly data set for ten European exchange-rate pairs covering a time span of 273 years constructed by the authors. To the best of the authors' knowledge this is the first study on nominal exchange-rate changes for a large number of exchange-rate pairs based on quarterly data spanning almost three centuries.

Private investment in advanced economies contracted sharply during the downturn that followed the global financial crisis. A substantial debt overhang has been one proposed explanation for this development. This paper evaluates the role of debt overhang for the slow recovery in investment in Denmark, a country in which levels of private debt rapidly increased before the crisis.

Based on firm-level panel data, this paper evaluates the links between debt and investment dynamics for individual firms during the downturn that followed the global financial crisis.

High leverage contributed to a slow recovery in investment during the downturn that followed the financial crisis, in particular for small and medium-sized enterprises. The effect cannot solely be attributed to mean reversion in investment.

Results point to the existence of a separate leverage or “balance sheet” channel with implications for macroeconomic volatility and financial stability.

Macroprudential or microprudential measures to counteract the build-up of excess leverage during upswings may contribute to reducing macroeconomic volatility and improving financial stability.

In contrast to previous studies, the panel dimension of data is used to take mean reversion in investment into account. The large, nationally representative panel data set allows to assess the macroeconomic relevance of the results, as well as enables subsample splits which are used to gain insights into potential mechanisms through which debt overhang impacts investment.