Download This PaperSpending a Windfall
International Economic Review, http://doi.org/10.1111/iere.12662
49 Pages Posted: 30 Nov 2016 Last revised: 8 Sep 2023
Date Written: July 25, 2023
Abstract
We study the effect of the discovery of precious metals in America from 1500 to 1810 on international trade. Around 1500, there was a simultaneous discovery of precious metals and new trading routes. We construct a counterfactual of new routes but no precious metals. The discovery of precious metals increased the stock of precious metals more than tenfold. We show that Euro-Asian trade at its peak increased up to 20 times compared with the counterfactual. Our simulations match the observed price dynamics. We find that precious metals were at least as important as the new routes.
Keywords: monetary injections, international trade, early modern trade, Euro-Asian trade, real effects of money
JEL Classification: E40, F40, N10
Suggested Citation: Suggested Citation
