Spending a Windfall

Nuno Palma and Andre Silva ()

No 16523, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: International trade; Monetary injections; Early modern trade; Euro-asian trade; Real effects of money (search for similar items in EconPapers)
JEL-codes: E40 F40 N10 (search for similar items in EconPapers)
Date: 2022-03
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Related works:
Journal Article: SPENDING A WINDFALL (2024)
Working Paper: Spending a Windfall (2023)
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