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The Hungarian risk: the premium on Hungarian state bonds, 1881–1914

  • Michael Pammer (a1)
Abstract

Both states that constituted the Austro-Hungarian Monarchy issued considerable amounts of perpetual bonds from the 1870s to World War I. These bonds constituted the greater part of the state debt, which was relatively larger in Hungary than in Austria. Movements in bond prices were not uniform for different kinds of securities such as gold bonds, paper bonds and bonds of the common debt of the pre-1867 era. Price movements and movements in the spread between Hungarian and Austrian bond yields followed a stochastic trend. Most fiscal factors such as the share of the state debt, and of state expenses, in GDP, the share of state consumption in overall state expenses, the relation between the debt service and the tax revenues, or the deficit in the state budget, had little or no impact. The conversion of debt instruments reveals a high degree of efficiency on the part of investors. Political crises affected relative price movements in the short run but were unimportant in the context of the middle- and long-term development. Throughout the period, Hungarian bonds as compared to Austrian bonds had lower prices in the Vienna Stock Exchange, suggesting a preference of Viennese investors for domestic securities independently from economic and political circumstances.

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Copyright
Corresponding author
Michael Pammer, Department of Social and Economic History, Johannes Kepler University, 4040 Linz-Auhof, Austria, michael.pammer@jku.at.
Footnotes
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The author wishes to thank participants in the SEEMHN conference 2015 (Austrian National Bank, Vienna), participants in the graduate seminar in economic history at Johannes Kepler University, two anonymous referees, and the editors, for numerous valuable suggestions and comments.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

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Financial History Review
  • ISSN: 0968-5650
  • EISSN: 1474-0052
  • URL: /core/journals/financial-history-review
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