Hans Janowitz, who was one of the writers of the silent classic film THE CABINET OF DR. CALIGARI, had been present at the site of a murder in 1913, where he believed he possibly witnessed a ghost or some other paranormal entity and extrapolated that the dark entity he saw committed the crime. Janowitz had followed a pretty young woman to a street fair in Hamburg, where he lost sight of her and witnessed a figure clad all in black materialize from some bushes. This figure inspired a feeling of disquiet in him, exuding a sinister presence. He went home, never catching up to the girl, and later learned that she—at least he believed it to be the same person—had been murdered. He was convinced that the dark figure he had seen had killed the girl. This figure became the sinister Cesare in the movie. The fair was located on Holstenwall, a street in Hamburg (and also a hotel), and Holstenwall became the name of the city in the movie wherein Cesare commits his murders.
There are also rumors that THE CABINET OF DR. CALIGARI was originally intended by the writers to be a more supernatural thriller than it became after some retooling from other cooks. The zombielike Cesare is creepy enough. How much more frightening might he have been if the movie was filmed as the authors first wanted?