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Stephanie Ettmeier
WORKING PAPER
When Disaster Triggers Crisis | with Moritz Schularick, and Petr Sedláček, Draft coming soon
This paper studies the effect of natural disasters on financial stability and quantifies the economic costs when disasters trigger financial crises. We construct a novel dataset spanning 120 years across 18 advanced economies and find that natural disasters increase financial crisis probability with a 2-3 year delay. Natural disasters increase crisis probability by 16 percentage points at the 2-year horizon. Our results suggest that financial crises roughly double the economic impact of natural disasters and provide the first clean estimate of financial disruption costs using quasi-random variation. The difference between disasters with and without subsequent crises isolates the pure cost of financial instability, addressing the endogeneity problem that plagues existing crisis cost studies.
February 2026
February 2026
Mixed-Frequency Considerations for Functional VAR Models| with Chi Hyun Kim, and Frank Schorfheide, Draft coming soon
We extend the functional VAR framework to accommodate mixed-frequency data via state-space methods. Macroeconomic aggregates are observed quarterly while cross-sectional earnings distributions are only available annually. Using the Kalman smoother, we bridge unobserved quarters and estimate distributional impulse responses to aggregate shocks. Exploiting the spell-based structure of German administrative data (IAB), we construct both quarterly earnings levels and yearly averages, allowing us to disentangle two sources of information loss: lower sampling frequency and temporal aggregation. In simulations and in the data, we find that mixed-frequency estimation performs well, while treating yearly averages as quarterly levels introduces systematic biases - compressing the distribution toward the median and distorting impulse responses.
Fatal Austerity?| with Alexander Kriwoluzky, and Lucas ter Steege
What does fiscal austerity do to an economy that cannot devalue? We study the sharpest historical case: Heinrich Brüning's consolidation into the depths of the Great Depression, under a gold-standard peg that foreclosed devaluation and left the Reichsbank unable to ease. We assemble the first monthly dataset of German federal revenues and expenditures, 1927-1935, dis aggregated into detailed spending and revenue categories. The disaggregation yields a discretionary fiscal measure purged of automatic stabilisers and allows us to identify an austerity shock through narrative sign restrictions anchored on the two 1930 emergency decrees, which are free of confounding from the financial turmoil of 1931. The consolidation's durable imprint is on the price level, which falls on impact and keeps falling for more than a year. Output falls too, but the concentration fades within half a year. Our counterfactual shows that the real collapse cannot be attributed to the discretionary shock. Under a fixed parity, austerity deepened the deflation rather than the slump.
September 2026
October 2024
Measuring the Effects of Aggregate Shocks on Unit-Level Outcomes and Their Distribution|with Chi Hyun Kim, and Frank Schorfheide
This paper studies the effect of aggregate shocks on micro-level outcomes. We develop and estimate a cross-sectional units vector autoregression (csuVAR) that combines aggregate variables with unit-level outcomes, earnings in our application. The csuVAR also allows us to reconstruct the cross-sectional distribution from the unit-level outcomes. We contrast the csuVAR with a functional VAR model (fVAR) that is designed to directly track the evolution of macroeconomic aggregates and a cross-sectional distribution, but not individual units. In an empirical application we examine the effect of productivity shocks on the unit-level labor earnings dynamics in Germany, using a panel data set constructed from the Sample of Integrated Labour Market Biographies (SIAB) published by the Institute for Employment Research (IAB) of the German Federal Employment Agency.
No Taxation without Reallocation: The Distributional Effects of Tax Changes
This paper quantifies the distributional effects of tax changes in the United States. A functional vector autoregression framework is used to estimate the joint dynamics of tax shocks, the cross-sectional distribution of disposable income, and macroeconomic aggregates. I distinguish between changes in personal and corporate income taxes and investigate the distributional effects on families and business owners. While tax cuts boost aggregate disposable income, the benefits are spread unevenly. The increase in overall inequality is driven primarily by rising disparities among entrepreneurs, particularly in the upper tail of their distribution. Though families experience reduced within-group inequality, neither families nor entrepreneurs benefit more in aggregate terms than their non-targeted counterparts, challenging prevalent political narratives about tax policy beneficiaries.
November 2024
WORK IN PROGRESS
Creating Expectations: Propaganda and the Economic Recovery in Nazi Germany
with Alexander Kriwoluzky, Andrea Papadia, and Moritz Schularick
Germany recovered from the Great Depression faster than any comparable economy - a gap that standard monetary and fiscal channels cannot explain. We provide causal evidence from a natural experiment: Nazi radio propaganda. Using quasi-random variation in radio signal strength across German labor districts, we find that stronger propaganda exposure causally reduced local unemployment. The effect is zero before Hitler's consolidation of power in mid-1934 and grows sharply thereafter, despite no corresponding change in propaganda content. It is largest where military rearmament, secret nationally but observable locally, was concentrated.
Fiscal Capacity in the Euro Area
with Chi Hyun Kim, and Sneha Roy
We leverage financial market data to empirically examine the impact of participating in a currency union on the fiscal capacity of individual countries. We assemble a comprehensive dataset encompassing corporate and sovereign bonds from all member countries within the euro area and extract factors that reflect both currency-union-specific and country-specific risks.We document how these risks vary throughout the euro area's history and along the yield curve, and correlate with monetary policy milestones of the currency union.
Wealth Inequality in Finland
with Ciprian Domnisoru, Chi Hyun Kim, Timm Prein, and Oskari Vähämaa
We adopt a historical perspective to chart the evolution of wealth in Finland from the late 19th century to the present. By synthesizing historical survey data with tax records, we construct a comprehensive timeline of wealth dynamics. Our research specifically illuminates the persistent wealth disparity between Finland's Finnish-speaking and Swedish-speaking populations, offering insights into the long-term socioeconomic structures of the country.
I have been awarded the Add-on Fellowship for Interdisciplinary Economics from the Joachim Herz Stiftung for 2024/2025 for this project.
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