The Austrian Institute for Business Cycle Research 1927-1938: Economic Research and Economic Policy in the First Republic

The Austrian Institute for Business Cycle Research founded at the end of 1926 – later to become the Austrian Institute for Economic Research – and directed by Friedrich A. Hayek and Oskar Morgenstern from 1927 to 1938, grew into an important extramural institution for economic research, widely recognised for its excellent international reputation. Over the years, its tasks shifted from the original focus on the diagnosis and forecasting of the business cycle, always regarded with some skepticism by economists of the Austrian School, towards a more comprehensive approach of economic research that made use of refined statistical methods. During the Great Depression, in sharp contrast to proto-Keynesian alternatives favoured elsewhere, the directors Hayek and Morgenstern propagated a hard currency, austerity and the easing of restrictions – a policy mix that, together with the rigid regulation of the Austrian economy, may have been the cause for the weak recovery in the 1930s.