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The microeconomics of bullionism: arbitrage, smuggling and silver outflows in Spain in the early 18th century

Pilar Nogues-Marco

IFCS - Working Papers in Economic History.WH from Universidad Carlos III de Madrid. Instituto Figuerola

Abstract: In the Early Modern period, there was a systematic flow of precious metals from the American colonies to Spain and Portugal and, from there, throughout the world. In this paper, I use newly discovered data on the black market for silver in Cadiz to reconstruct a picture of Castilian smuggling and international silver flows in the Age of Bullionism (1729-1741). The arbitrage equation shows persistent violations of the silver-point that made arbitrage systematically profitable until devaluation pegged the exchange rate to the arbitrated parity. Market structure explains the persistent violations. The Cadiz shadow price was lower than the international market price because bullionist regulations configured an oligopsonistic structure. The price gap was the reason for the Castilian silver outflows to Europe

Keywords: Bullionism; Capital; controls; Silver; outflows; Silver-point; mechanism; Smuggling; Oligopsony; Arbitrage (search for similar items in EconPapers)
JEL-codes: D43 E52 L22 N13 (search for similar items in EconPapers)
Date: 2011-06
New Economics Papers: this item is included in nep-his and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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