The Logic of Compromise: Monetary bargaining in Austria-Hungary 1867-1913
AbstractThis paper examines the historical record of the Austro-Hungarian monetary union, focusing on its bargaining dimension. As a result of the 1867 Compromise, Austria and Hungary shared a common currency, although they were fiscally sovereign and independent entities. By using repeated threats to quit, Hungary succeeded in obtaining more than proportional control and forcing the common central bank into a policy that was very favourable to it. Using insights from public economics, this paper explains the reasons for this outcome. Because Hungary would have been able to secure quite good conditions for itself had it broken apart, Austria had to provide its counterpart with incentives to stay on board. I conclude that the eventual split of Hungary after WWI was therefore not written on the wall in 1914, since the Austro-Hungarian monetary union was quite profitable to Hungarians.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5397.
Date of creation: Jan 2006
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Other versions of this item:
- Flandreau, Marc, 2006. "The logic of compromise: Monetary bargaining in Austria-Hungary, 1867 1913," European Review of Economic History, Cambridge University Press, vol. 10(01), pages 3-33, April.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-12 (All new papers)
- NEP-CBA-2006-02-12 (Central Banking)
- NEP-HIS-2006-02-12 (Business, Economic & Financial History)
- NEP-MAC-2006-02-12 (Macroeconomics)
- NEP-MON-2006-02-12 (Monetary Economics)
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