The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire

81 Pages Posted: 15 Nov 2019 Last revised: 27 May 2022

See all articles by Adam Brzezinski

Adam Brzezinski

University of Oxford

Yao Chen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Nuno Pedro G. Palma

University of Manchester

Felix Ward

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: October 2019

Abstract

Maritime disasters in the Spanish Empire (1531-1810) resulted in the loss of substantial amounts of silver money. We exploit this recurring natural experiment to estimate the effect that an exogenous change in the money supply has on the real economy. We find that negative money supply shocks caused Spanish real output to decline. A transmission channel analysis highlights slow price adjustments and credit frictions as channels through which money supply changes affected the real economy. Especially large output declines occurred in textile manufacturing against the backdrop of a credit crunch that impaired merchants' ability to supply their manufacturers with inputs.

Keywords: DSGE, financial accelerator, Local projection, minimum-distance estimation, Monetary shocks, Natural Experiment, Nominal Rigidity

JEL Classification: E43, E44, E52, N10, N13

Suggested Citation

Brzezinski, Adam and Chen, Yao and Palma, Nuno Pedro G. and Ward, Felix, The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire (October 2019). CEPR Discussion Paper No. DP14089, Available at SSRN: https://ssrn.com/abstract=3486240

Adam Brzezinski (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Yao Chen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Nuno Pedro G. Palma

University of Manchester ( email )

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

Felix Ward

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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