Essays on Macroeconomic Uncertainty, Expectations and Monetary Policy

This dissertation consists of six essays that I worked on during my time at the University of Giessen and shortly afterwards, after joining the Deutsche Bundesbank. I ordered them not strictly chronologically, but rather chronologically within broader topics, since not all of them are closely related.
The first two essays study the effects of uncertainty surrounding the war in Ukraine. Specifically, Essay I, Uncertainty about the War in Ukraine: Measurement and Effects on the German Economy, co-authored with Sinem Kandemir and Peter Tillmann, constructs an uncertainty measure using more than eight million German-language tweets. We quantify uncertainty using text-based machine-learning methods and document its effects on daily financial and macroeconomic variables.
In Essay II, Geopolitics in the Boardroom: How German Managers Respond to the War in Ukraine, co-authored with the same team, we again use our Ukraine Uncertainty Index and study the responses of German managers. Using data from the German Business Panel, we document that managers respond strongly to uncertainty surrounding the war. They plan higher prices and expect declines in dividends, revenues, and profits after an uncertainty shock.
In Essay III, Salah Hassanin accompanied me on a journey into the metaverse. In the paper Monetary Metanomics: The Effect of Monetary Policy on Virtual Real Estate Prices, we create a price index from blockchain-based transactions of virtual land on the platform Decentraland. In a second step, we estimate the effects of the Federal Reserve’s monetary policy. We show that prices in this virtual world respond strongly, but only briefly, to real-life monetary policy shocks.
Essays IV, V, and VI broadly investigate different influences on households’ inflation beliefs.
In Essay IV, Household Expectations and Dissent Among Policymakers, Peter Tillmann and I study the effect of dissent in the ECB’s Governing Council on inflation expectations. We conduct a randomized controlled trial in the Bundesbank Online Panel Households (BOP-HH), mimicking the communication of voting results of the Governing Council during ECB press conferences. This allows us to estimate the causal effect of this specific piece of information. We find that information about dissenting views especially affects the individual uncertainty of inflation expectations. In particular, households with anchored expectations become more uncertain when they learn that the Governing Council did not vote unanimously.
Essay V, Inflation Expectations and a Conservative Central Banker: A Natural Experiment (with Peter Tillmann), studies the effect of Jens Weidmann’s resignation as President of the Deutsche Bundesbank on households’ expectations. Weidmann is 2a known policy hawk, and his resignation was unexpected. This allows us to study the effects of a conservative central banker in a natural experiment. Conveniently for our analysis, the resignation falls into wave 22 of the BOP-HH, allowing us to compare expectations before and after this event. We find that the announcement of the resignation increases uncertainty about inflation expectations and reduces trust in the ECB.
The final and most recent paper, Essay VI, Prices at Prime Time: How TV News Shape Inflation Attention in Germany (with Brenton Bruns), is about households’ attention to inflation and the role of the Tagesschau. We measure Tagesschau coverage of inflation using data from the NDR archive and video material, and show that TV news plays an important role in shaping households’ attention to inflation and their beliefs.