The Sustainable Debts of Philip II: A Reconstruction of Spain's Fiscal Position, 1560-1598
AbstractThe defaults of Philip II have attained mythical status as the origin of sovereign debt crises. The king failed to honour his debts four times during his reign. In this paper, we reassess the fiscal position of Habsburg Spain. New archival evidence allows us to derive comprehensive estimates of debt and revenue. These show that primary surpluses were sufficient to make the king's debt sustainable for most of his reign. Spain's debt burden was manageable up to the 1580s, and its fiscal position only deteriorated for good after the defeat of the "Invincible Armada". We also estimate fiscal policy reaction functions, and show that Spain under the Habsburgs was at least as "responsible" as the US in the 20th century or as Britain in the 18th century. Our results suggest that the outcome of uncertain events such as wars may have more influence on a history of default than strict adherence to fiscal rules.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6611.
Date of creation: Dec 2007
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Find related papers by JEL classification:
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
- N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
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- Carlos Álvarez Nogal [canogal] & Christophe Chamley, 2011. "Debt policy under constraints between Philip II, the Cortes and Genoese bankers," Working Papers in Economic History wp11-06, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
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