Strategy and Implementation of Employment Policy in Austria

Abstract

SUMMARYAustrian business cycle policy was unconventional but rather successful in the last three decades and especially since the oil crisis. The unconventional conception was developed by trial and error, only ex post it got the name Austro‐Keynesianism. Nevertheless it has a theoretical basis, a rather radical interpretation of KEYNES, which bases economic instability on a deep‐rooted uncertainty of entrepreneurs. According to this interpretation economic policy tried to stabilize the data most important for entrepreneurial decisions, especially wage increase, exchange rates and investment promotion. This lightened the burden of the traditional instruments of stabilization policy. In addition these instruments were assigned differently: Exchange rate policy was primarily used to stabilize prices in the short run, incomes policy to equilibrate the current account in the medium and longer run, fiscal policy to stabilize employment. While the new assignation proved useful for stabilization policy, some structural problems remained unsolved.