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

Adam Brzezinski, Yao Chen, Nuno Palma and Felix Ward
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Adam Brzezinski: London School of Economics and Political Science
Yao Chen: Erasmus University Rotterdam
Felix Ward: Erasmus University Rotterdam

The Review of Economics and Statistics, 2024, vol. 106, issue 5, 1220-1235

Abstract: We estimate the effect of money supply changes on the real economy by exploiting a recurring natural experiment: maritime disasters in the Spanish Empire (1531–1810) that resulted in the loss of substantial amounts of silver money. 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 mechanisms 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.

Date: 2024
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https://doi.org/10.1162/rest_a_01223
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Related works:
Working Paper: The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire (2024)
Working Paper: The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire (2022)
Working Paper: The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire (2022)
Working Paper: The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire (2019)
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