[embedded content] My latest Macro Musing podcast is with Jesus Fernandez-Villaverde. Jesus is a professor of economics the University of Pennsylvania, a research associate with the National Bureau of Economic Research, and a research affiliate with the Centre for Economic Policy Research. Jesus does theoretical macroeconomic modeling, econometrics, and economic history. He has several books coming out on those topics and recently coauthored a chapter in the Handbook of Macroeconomics titled "Solution and Estimation Methods for DSGE Models". He joined me to talk about European economic history and macroeconomic modeling on the show. Most of our conversation focused on German monetary history in the 20th century since it has been so consequential for the rest of the Europe. We began by discussing the Weimar hyperinflation of the early-to-mid 1920s and the Great Depression of the late 1920s-early 1930s. It is hard to appreciate the fact that Germany went from hyperinflation to painful deflation in a decade. Several interesting questions come out this experience. First, which is worse: hyperinflation or depression? Second, why do the Germans seem to remember the former more than the later? Third, is it true that the Great Depression brought the Nazis to power? Jesus provides good answers to these in the interview.
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Update: Since we talked about it in the podcast, here is a chart I created some time ago on the EMS crisis in 1992It shows Germany's tightening of monetary policy pulling down (via the peg) nominal demand in other European countries. It is also shows a recovery in UK nominal spending once the peg was broken.