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 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)
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