Two centuries of currency policy in Austria

This paper is devoted to currency policies in Austria over the last 200 years, attempting to sketch historical developments and uncover regularities and interconnections with macroeconomic variables. While during the 19th century the exchange rate resembled a kind of technical relation, since World War I (WW I) it has evolved as a policy instrument with the main objectives of controlling inflation and fostering productivity. During most of the 200-year period, Austrian currencies were subject to fixed exchange rates, in the form of silver and Gold standards in the 19th century, as a gold-exchange standard and hard currency policy in much of the 20th century, and with the euro as the single currency in the early 21st century. Given Austria’s euro area membership, national exchange rate policy has been relinquished in favor of a common currency which itself is floating vis-à-vis third currencies. Austria’s predilection for keeping exchange rates stable is due not least to the country’s transformation from one of Europe’s few great powers (up to WW I) to a small open economy closely tied to the large German economy.