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Tu Felix Austria: Evidence for a de-celerator in financial reform

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  • Benedikt Braumann

Abstract

This paper analyzes some reasons for the apparent success of financial liberalization in Austria. Against the odds, Austria’s ambitious program of deregulation between 1977 and 2000 did not result in a financial crisis, but yielded large and tangible benefits. While the Austrian experience has so far not attracted much attention in the literature, it may contain important lessons on policy best practices, and on the transmission mechanism of monetary policy. Three implications emerge from this study: First, gradualism worked well. The slicing of reforms into manageable pieces avoided a cumulation of risk factors and the emergence of financial bubbles. Second, financial reform was timed in a counter-cyclical manner, which added stability to the economy. Finally, the large banking sector was able to stabilize itself. The predominance of financial networks and non-profit banks in Austria gave rise to a counter-cyclical lending behavior, i.e. a financial decelerator. Copyright Springer-Verlag Berlin Heidelberg 2004

Suggested Citation

  • Benedikt Braumann, 2004. "Tu Felix Austria: Evidence for a de-celerator in financial reform," International Economics and Economic Policy, Springer, vol. 1(1), pages 53-72, March.
    • Handle: RePEc:kap:iecepo:v:1:y:2004:i:1:p:53-72
    DOI: 10.1007/s10368-003-0007-0
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    Cited by:

    1. Burgstaller Johann, 2010. "Bank Lending and Monetary Policy Transmission in Austria," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(2), pages 163-185, April.
    2. Sylvia Kaufmann & Sylvia Frühwirth-Schnatter, 2006. "How do changes in monetary policy affect bank lending? An analysis of Austrian bank data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(3), pages 275-305.
    3. Johann Burgstaller, 2006. "The cyclicality of interest rate spreads in Austria: Evidence for a financial decelerator?," Economics working papers 2006-02, Department of Economics, Johannes Kepler University Linz, Austria.
    4. Ersi Athanassiou & Nikolaos C. Kanellopoulos & Roxani Karagiannis & Ioannis Katselidis & Agapi Kotsi, 2016. "Measurement of the intensity of the reforms in professions and economic activities in Greece via a composite regulation index," International Economics and Economic Policy, Springer, vol. 13(3), pages 411-428, July.
    5. Johann Burgstaller, 2006. "Financial predictors of real activity and the propagation of aggregate shocks," Economics working papers 2006-16, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Johann Burgstaller, 2006. "Bank income and profits over the business and interest rate cycle," Economics working papers 2006-11, Department of Economics, Johannes Kepler University Linz, Austria.

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