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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

    (Sciences Po)

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.

Suggested Citation

  • Marc Flandreau, 2001. "The Bank, the States, and the Market: an Austro-Hungarian Tale for Euroland, 1867-1914," Sciences Po publications n°43, Sciences Po.
    • Handle: RePEc:spo:wpmain:info:hdl:2441/623
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    References listed on IDEAS

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    1. repec:hal:spmain:info:hdl:2441/645 is not listed on IDEAS
    2. Rudiger Dornbusch, 1992. "Monetary problems of post-communism: Lessons from the end of the Austro-Hungarian empire," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 128(3), pages 391-424, September.
    3. Marc Flandreau & Jacques Le Cacheux & Frédéric Zumer, 1998. "Stability without a pact?," Post-Print hal-03416381, HAL.
    4. Marc Flandreau, 1993. "On the Inflationary Bias of Common Currencies: the Latin Union Puzzle," Post-Print hal-03416221, HAL.
    5. Mathilde Maurel, 1998. "Régionalisme et désintégration en Europe centrale et orientale : Une approche gravitationnelle," Post-Print halshs-00468847, HAL.
    6. Frédéric Zumer & Jacques Le Cacheux & Marc Flandreau, 1998. "Stability without a pact? Lessons from the European Gold Standard, 1880-1913," Working Papers hal-01037858, HAL.
    7. 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 116-162.
    8. Willem H. Buiter, 1999. "Alice in Euroland," Journal of Common Market Studies, Wiley Blackwell, vol. 37(2), pages 181-209, June.
    9. Missale, Alessandro & Blanchard, Olivier Jean, 1994. "The Debt Burden and Debt Maturity," American Economic Review, American Economic Association, vol. 84(1), pages 309-319, March.
    10. Marc Flandreau & Jacques Le Cacheux & Frédéric Zumer, 1998. "Stability without a pact?," Post-Print hal-03416381, HAL.
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    12. Marc Flandreau, 1996. "The Geography of the Gold Standard," Post-Print hal-03398015, HAL.
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    Cited by:

    1. 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.

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    More about this item

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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