Did Nordic Countries Recognize the Gathering Storm of World War II? Evidence from the Bond Markets

University of Zurich Institute for Empirical Research in Economics Working Paper No. 336

34 Pages Posted: 16 Oct 2007

See all articles by Daniel Waldenström

Daniel Waldenström

Research Institute of Industrial Economics

Bruno S. Frey

CREMA; University of Basel

Date Written: October 2007

Abstract

This paper analyzes and compares different ways of assessing how people perceived impending threats of war in the past. Conventional Nordic historiography of World War II claims there were few, if any, people in the Nordic countries who perceived a significantly increased threat of war between 1938 and early 1940. At the same time, historical methods face problems when it comes to capturing the often tacitly held beliefs of a large number of people in the past. In this paper, we analyze these assessments by looking at sudden shifts in sovereign debt yields and spreads in the Nordic bond markets at that time. Our results suggest that Nordic contemporaries indeed perceived significant war risk increases around the time of major war-related geopolitical events. While these findings question some - but not all - of standard Nordic World War II historiography, they also demonstrate the value of analyzing historical market prices to reassess the often tacitly held views and opinions of large groups of people in the past.

Keywords: Structural breaks, Sovereign debt, Capital markets, Historiography, Cliometrics, World War II

JEL Classification: C22, G14, N01, N44

Suggested Citation

Waldenstrom, Daniel and Frey, Bruno S., Did Nordic Countries Recognize the Gathering Storm of World War II? Evidence from the Bond Markets (October 2007). University of Zurich Institute for Empirical Research in Economics Working Paper No. 336. Available at SSRN: https://ssrn.com/abstract=1021943 or http://dx.doi.org/10.2139/ssrn.1021943

Daniel Waldenstrom (Contact Author)

Research Institute of Industrial Economics ( email )

P.O. Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/danielw

Bruno S. Frey

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

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