The 1628 Castilian crydown: A test of competing theories of the price level

José Isidro García de Paso ()
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José Isidro García de Paso: Universidad Complutense de Madrid

Hacienda Pública Española / Review of Public Economics, 2002, vol. 163, issue 4, 71-92

Abstract: On August 7, 1628 the Castilian government halved overnight the nominal stock of money through the 50% crydown of its copper currency. The paper argues that this helicopter lift of money is a nice historical experiment to put to the test the empirical relevance of competing theories of the price level. The experiment shows how the post-crydown behaviour of the price level predicted by the weak form fiscal theory (the so-called Sargent-Wallace theory) matches actual data better than both the strong form fiscal theory and the quantity theory (the so-called monetarist theory). Classification-JEL : E31, E42, E63, E65, N13.

Keywords: crydown; monetarist theory; weak form fiscal theory; strong form fiscal theory. (search for similar items in EconPapers)
Date: 2002
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