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The Bank, the States, and the Market: An Austro-Hungarian Tale for Euroland, 1867-1914

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  • Marc Flandreau

    ()
    (University of Lille; Research Fellow, OFCE (Paris); CEPR (London))

Abstract

In 1867, the "Compromise" between Austria and Hungary laid the foundation of a single currency system with a common central bank. As in today’s euroland, each part of the monarchy remained sovereign in fiscal matters. Moreover, the borrowing needs of both parts of the monarchy were quite large, since Austria and Hungary sought to promote their own economic development through government spending. Yet no ‘fiscal stability pact’ existed: the two countries could run deficits to the extent of the public's willingness to lend to them. They were thus only subjected to the discipline of the capital market. This paper documents the record of the Austro-Hungarian monetary union and shows how this discipline led to a process of increased power of the central bank.

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Bibliographic Info

Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 43.

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Length: 58
Date of creation: 26 Mar 2001
Date of revision:
Handle: RePEc:onb:oenbwp:43

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Keywords: Credit channel; balance sheet channel; investment; panel data;

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  1. Willem H. Buiter, 1999. "Alice in Euroland," Journal of Common Market Studies, Wiley Blackwell, vol. 37(2), pages 181-209, 06.
  2. Missale, Alessandro & Blanchard, Olivier Jean, 1994. "The Debt Burden and Debt Maturity," American Economic Review, American Economic Association, vol. 84(1), pages 309-19, March.
  3. Rudiger Dornbusch, 1992. "Monetary problems of post-communism: Lessons from the end of the Austro-Hungarian empire," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(3), pages 391-424, September.
  4. Marc Flandreau & Jacques Le Cacheux & Frédéric Zumer, 1998. "Stability without a pact? Lessons from the European gold standard, 1880-1914," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 115-162, 04.
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  1. A History Lesson for Scotland
    by Carola Binder in Noahpinion on 2013-11-27 04:05:00
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Cited by:
  1. Tullio, Guiseppe & Wolters, Jürgen, 2004. "Monetary policy in Austria-Hungary, 1876 - 1913: An econometric analysis of the determinants of the Central Bank's discount rate and the liquidity ratio," Discussion Papers 2004/24, Free University Berlin, School of Business & Economics.
  2. Flandreau, Marc & Maurel, Mathilde, 2001. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe: Just Do It," CEPR Discussion Papers 3087, C.E.P.R. Discussion Papers.
  3. Marc Flandreau & Mathilde Maurel, 2005. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe," Open Economies Review, Springer, vol. 16(2), pages 135-152, April.
  4. Tullio, Guiseppe & Wolters, Jürgen, 2004. "Domestic and international determinants of the Bank of England's liquidity ratios during the classical gold standard, 1876 - 1913: An econometric analysis," Discussion Papers 2004/27, Free University Berlin, School of Business & Economics.
  5. Rodney Thom & Brendan Walsh, 2001. "The Effect of a Common Currency on Trade - Ireland before and after the Sterling Link," Working Papers 200110, School Of Economics, University College Dublin.
  6. Richard C.K. Burdekin & Kris James Mitchener & Marc D. Weidenmier, 2011. "Irving Fisher and Price-Level Targeting in Austria: Was Silver the Answer?," NBER Working Papers 17123, National Bureau of Economic Research, Inc.

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