The Logic of Compromise: Monetary bargaining in Austria-Hungary 1867-1913

No 5397, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This 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.

Keywords: Monetary union; Free riding; Secession; market integration (search for similar items in EconPapers)
JEL-codes: F31 N32 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The logic of compromise: Monetary bargaining in Austria-Hungary, 1867–1913 (2006)
Working Paper: The logic of compromise: monetary bargaining in Austria-Hungary 1867-1913 (2006)
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