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

Carlo Ciccarelli () and Anna Missiaia ()

The Annals of Regional Science, 2018, vol. 60, issue 1, No 8, 193 pages

Abstract: Abstract 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-codes: E32 N33 R11 F45 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s00168-017-0850-5

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