The Annals of Regional Science

, Volume 60, Issue 1, pp 171–193 | Cite as

The fall and rise of business cycle co-movements in Imperial Austria’s regions

  • Carlo CiccarelliEmail author
  • Anna Missiaia
Original Paper


This paper investigates regional business cycle co-movements in Austria–Hungary from 1867 to 1913. Economic theory suggests that rising market integration induces sectoral specialisation, resulting in a reduction in the correlation of regional GDP cycles (Krugman effect). However, the synchronisation of business cycles is expected to increase because of the growing inter-linkages among regions led by the adoption of common currency and common economic policies (Frankel and Rose effect). We show that in the case of nineteenth-century Austria–Hungary the specialisation effect, most likely amplified by the stock market crisis of 1873, prevailed during 1867–1890, while the common currency/policy effect prevailed during 1890–1913, when the gold standard was adopted in both Austria and Hungary. However, core and peripheral regions contributed differently to the correlation of business fluctuations.

JEL Classification

E32 N33 R11 F45 



This is a completely revised version of LSE Economic History Working Paper no. 186 (2014) and CEIS Working Paper no. 312 (2014). The underlying database and the methodologies have been considerably modified and updated compared to the previous versions. The paper has been presented at the LSE Economic History Graduate Students Seminar (2013), the Frontier Research in Economic and Social History (FRESH) meetings in Warsaw (2013) and Odense (2015), and at the European Historical Economics Society (EHES) conference in London (2013). We thank the participants for useful comments. Special thanks to Tomá Cvrček, Michael Pammer, Tommaso Proietti, Max Schulze, Tamás Vonyó, and Stephan Werner. We also thank the two anonymous referees and the editor for their feedback and constructive criticism. The usual disclaimer applies.


  1. A’Hearn B, Woitek U (2001) More international evidence on the historical properties of business cycles. J Monet Econ 47(2):321–346CrossRefGoogle Scholar
  2. Barrios S, De Lucio JJ (2003) Economic integration and regional business cycles: evidence from the Iberian regions. Oxf Bull Econ Stat 65(4):497–515CrossRefGoogle Scholar
  3. Belke A, Heine J (2006) Specialisation patterns and the synchronicity of regional employment cycles in Europe. IEEP 3(2):91–104CrossRefGoogle Scholar
  4. Bergman UM (1999) Do monetary unions make economic sense? Evidence from the Scandinavian Currency Union, 1873–1913. Scand J Econ 101:363–377CrossRefGoogle Scholar
  5. Broadberry S, Federico G, Klein A (2010) Sectoral developments 1870–1914. In: Broadberry S, O’Rourke KH (eds) The Cambridge economic history of modern Europe vol. 2, “1870 to the present”. Cambridge University Press, CambridgeGoogle Scholar
  6. Chow GC (1960) Tests of equality between sets of coefficients in two linear regressions. Econometrica 28(3):591–605CrossRefGoogle Scholar
  7. Ciccarelli C, Fenoaltea S (2007) Business fluctuations in Italy, 1861–1913: the new evidence. Explor Econ Hist 44(3):432–451CrossRefGoogle Scholar
  8. Ciccarelli C, Fenoaltea S, Proietti T (2010) The effects of unification: markets, policy, and cyclical convergence in Italy, 1861–1913. Cliometrica 4(3):269–292CrossRefGoogle Scholar
  9. Cvrcek T (2013) Wages, prices, and living standards in the Habsburg Empire, 1827–1910. J Econ Hist 73(1):1–37CrossRefGoogle Scholar
  10. De Cecco M (1984) The international gold standard: money and empire. Frances Pinter, LondonGoogle Scholar
  11. De Haan J, Inklaar R, Jong-A-Pin R (2008) Will business cycles in the Euro area converge? A critical survey of empirical research. J Econ Surv 22(2):234–273CrossRefGoogle Scholar
  12. Eddie SM (1982) Limits on the fiscal independence of sovereign states in customs union: 4 tax union. Aspects of the Austro-Hungarian monarchy, 1868–1911. Hung Stud Rev 9(2):7–28Google Scholar
  13. Eddie SM (1989) Economic policy and economic development in Austria–Hungary, 1867–1913. In: Mathias P, Pollard S (eds) The Cambridge economic history of Europe from the Decline of the Roman Empire, Vol. 8, “The industrial economies: the development of economic and social policies”. Cambridge University Press, CambridgeGoogle Scholar
  14. Fatàs A (1997) EMU: countries or regions? Lessons from the EMS experience. Eur Econ Rev 41(3–5):743–751CrossRefGoogle Scholar
  15. Fink N, Kepler J (2014) The sugar cartel in Austria–Hungary before 1914. In: Annual Conference of the European Association for Research in Industrial EconomicsGoogle Scholar
  16. Flandreau M (2001) The Bank, the States, and the Market: an Austro-Hungarian Tale for Euroland, 1867–1914. Oesterreichische Nationalbank working papers. 43Google Scholar
  17. Flandreau M (2006) The logic of compromise: monetary bargaining in Austria–Hungary, 1867–1913. Eur Rev Econ Hist 10(1):3–33CrossRefGoogle Scholar
  18. Flandreau M, Komlos J (2002) Core or periphery? The credibility of the Austro-Hungarian currency 1867–1913. J Eur Econ Hist 31(2):293–320Google Scholar
  19. Flandreau M, Flores J, Jobst C, Khoudour-Casteras D (2010) Business cycles, 1870–1914. In: Broadberry S, O’Rourke KH (eds) The Cambridge economic history of modern Europe, vol. 2, “1870 to the present”. Cambridge University Press, CambridgeGoogle Scholar
  20. Flandreau M, Maurel M (2001) Monetary union, trade integration, and business cycles in 19th century Europe: just do it. CEPR discussion papers, CEPR, p 3087Google Scholar
  21. Frankel J, Rose A (1998) The endogeneity of the optimum currency area criteria. Econ J 108(449):1009–1025CrossRefGoogle Scholar
  22. Giannone D, Lenza M, Reichlin L (2008) Explaining the great moderation: it is not the shocks. J Eur Econ Assoc 6(2–3):621–633CrossRefGoogle Scholar
  23. Good D (1978) The great depression and Austrian growth after 1873. Econ Hist Rev 31(2):290–294CrossRefGoogle Scholar
  24. Good D (1984) The economic rise of the Habsburg Empire: 1750–1914. University of California Press, BerkeleyGoogle Scholar
  25. Hamilton JD (2017) Why you should never use the Hodrick–Prescott filter. Rev Econ Stat (forthcoming)Google Scholar
  26. Jobst C, Scheiber T (2014) Monetary and economic statistics for Austria–Hungary: 1863 to 1914. Oesterreichische Nationalbank working papers (2014)Google Scholar
  27. Komlos J (1978) Is the depression in Austria after 1873 a ‘myth’? Econ Hist Rev 31(2):287–289CrossRefGoogle Scholar
  28. Komlos J (1983) The Habsburg monarchy as a custom union. Economic development in Austria–Hungary in the nineteenth century. Princeton University Press, PrincetonGoogle Scholar
  29. Krugman P (1991) Geography and trade. MIT Press, CambridgeGoogle Scholar
  30. Kuznets S (1928) On moving correlation of time sequences. J Am Stat Assoc 23:121–136CrossRefGoogle Scholar
  31. Lee J (2013) Business cycle synchronization in Europe: evidence from a dynamic factor model. Int Econ 27(3):347–364CrossRefGoogle Scholar
  32. Maddison A (2007) Contours of the world economy, 1–2030 AD: essays in macro-economic history. Oxford University Press, OxfordGoogle Scholar
  33. Marelli E (2006) Specialisation and convergence of European regions. Eur J Comp Econ 4(2):149–178Google Scholar
  34. Mink M, Jacobs JPAM, de Haan J (2012) Measuring coherence output gaps with an application to the Euro area. Oxford Econ Pap 64(2):217–236CrossRefGoogle Scholar
  35. Montoya L, de Haan J (2008) Regional business cycle synchronization in Europe? IEEP 5:123–137CrossRefGoogle Scholar
  36. Morys M (2006) The classical gold standard in the European periphery: a case study of Austria–Hungary and Italy, 1870–1913. Ph.D. Thesis, London School of Economics and Political ScienceGoogle Scholar
  37. Mühlpeck V, Sandgruber R, Woitek H (1994) The consumer price index from 1800 to 1914. In: Matis H (ed) The economic development of Austria since 1870. Elgar Publishing Company, BrookfieldGoogle Scholar
  38. Pacher S (1996) Die Wirtschaftsentwicklung Österreich-Ungarns von 1867 bis, (1914) Eine quantitativ-konjunkturzyklische Analyse. Ph.D. diss, University of Graz, GrazGoogle Scholar
  39. Pammer M (2010) Public Finance in Austria–Hungary, 1820–1913. In: Cardoso JL, Lains P (eds) Paying for the liberal state. Cambridge University Press, New YorkGoogle Scholar
  40. Schulze MS (2000) Patterns of growth and stagnation in the late nineteenth century Habsburg economy. Eur Rev Econ Hist 4(3):311–340CrossRefGoogle Scholar
  41. Schulze MS (2007a) Regional income dispersion and market potential in the late nineteenth century Hapsburg Empire. Economic history working papers. Department of Economic History, LSE, 106/07Google Scholar
  42. Schulze MS (2007b) Origins of catch-up failure: comparative productivity growth in the Habsburg Empire, 1870–1910. Eur Rev Econ Hist 2:189–218CrossRefGoogle Scholar
  43. Schulze MS, Wolf N (2012) Economic nationalism and economic integration: the Austro-Hungarian Empire in the late nineteenth century. Econ Hist Rev 65(2):652–673CrossRefGoogle Scholar
  44. Turnock D (1989) Eastern Europe: an historical geography 1815–1945. Routledge, LondonCrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.Department of Economics and FinanceUniversity of Rome Tor VergataRomeItaly
  2. 2.Economic History DepartmentLund UniversityLundSweden

Personalised recommendations