Wars, reconstruction, and the green transition all require financing on a massive scale. My research, carried out in the Emmy Noether group OBFA-TRANSFORM, studies how states organize it through off-balance-sheet fiscal agencies, from the Mefo bills of the 1930s to today’s development banks and special funds.
Political decisions to transform an economy, whether to fight a war, rebuild after one, or decarbonize, raise the question of how to pay for them. The literature usually names three routes: taxation, treasury borrowing, and central bank money creation. This triad rests on loanable funds thinking and overlooks that credit money is created, not redistributed. In a credit money system, financing a transformation unfolds in three phases: an initial expansion of balance sheets, long-term funding, and a final contraction, which is ideally orderly but often takes the form of default or inflation. Much of this happens outside the core budget, through off-balance-sheet fiscal agencies (OBFAs) such as development banks, guarantee schemes, and special funds.
Financing large-scale transformations: initial expansion, long-term funding, and final contraction.
Since 2023, I have led the Emmy Noether research group OBFA-TRANSFORM, funded by the German Research Foundation (DFG) and hosted at the Global Climate Forum in Berlin. Our hypothesis is that states use OBFAs as vehicles for large-scale transformations, and that today’s monetary architectures are the sediment of past transformations. The group’s working papers reconstruct historical cases of war finance, such as the German war economy of 1914–18, the Mefo bills in Nazi Germany, and the British Exchange Equalisation Account; of reconstruction finance, such as US mortgage finance, British industrial finance, and the Kreditanstalt für Wiederaufbau; and of the contemporary fiscal ecosystem and green transition finance. We have also built an open dataset on OBFA financing.
Analytical map of Germany’s fiscal ecosystem comprising treasuries and off-balance-sheet fiscal agencies. Figure from Laudage Rexroth, Haas, Guter-Sandu, and Murau (2026), Journal of Law and Political Economy. Click to enlarge.
The research speaks directly to current debates. Germany’s special funds for defense and infrastructure, Europe’s efforts at rearmament, and the financing of decarbonization all rely on OBFAs. In a project for South Africa’s National Planning Commission, we applied the framework to the country’s monetary architecture and the persistence of underinvestment since the end of apartheid.
Key publications
- ‘Monetary Architecture and the Green Transition’ (with Armin Haas and Andrei Guter-Sandu), Environment and Planning A: Economy and Space, 2024.
- ‘Green Macro-Financial Governance in the European Monetary Architecture. Assessing the Capacity to Finance the Net-Zero Transition’ (with Armin Haas and Andrei Guter-Sandu), Competition and Change, 2026.
- ‘State Finance Beyond the Core Budget. Off-Balance-Sheet Fiscal Agencies in Germany’s Fiscal Ecosystem’ (with Gregor Laudage Rexroth, Armin Haas, and Andrei Guter-Sandu), Journal of Law and Political Economy, 2026.
- ‘The Mefo Operation. A Macro-Financial Analysis of Camouflaged Sovereign Borrowing through Off-Balance-Sheet Fiscal Agencies, 1933–1945’ (with Armin Haas, Friederike Reimer, and Andrei Guter-Sandu), OBFA-TRANSFORM Working Paper No. 2, 2024.
- ‘How Off-Balance-Sheet Fiscal Agencies Can Expand Fiscal Space to Finance Geoeconomic Challenges’ (with Armin Haas and Moritz Kapff), in: Hilpert and Lohmann (eds.), The Return of Power Politics to the Market, SWP Research Paper 7, 2026.
- ‘The Transformation of South Africa’s Monetary Architecture, 1983–2024’ (with Mark Swilling), Report for South Africa’s National Planning Commission, 2025.
All publications are listed under Publications.
