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

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  • Nogues-Marco, María del Pilar

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

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  • Nogues-Marco, María del Pilar, 2011. "The microeconomics of bullionism : arbitrage, smuggling and silver outflows in Spain in the early 18th century," IFCS - Working Papers in Economic History.WH wp11-05, Universidad Carlos III de Madrid. Instituto Figuerola.
    • Handle: RePEc:cte:whrepe:wp11-05
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    References listed on IDEAS

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    1. Nogues-Marco, Pilar, 2013. "Competing Bimetallic Ratios: Amsterdam, London, and Bullion Arbitrage in Mid-Eighteenth Century," The Journal of Economic History, Cambridge University Press, vol. 73(2), pages 445-476, June.
    2. Pilar Nogues-Marco, 2011. "Tipos de cambio y tipos de interés en Cádiz en el siglo XVIII (1729-1788)," Estudios de Historia Económica, Banco de España, number 58, November.
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    Cited by:

    1. Adam Brzezinski & Yao Chen & Nuno Palma & Felix Ward, 2019. "The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire," Economics Discussion Paper Series 1906, Economics, The University of Manchester, revised May 2022.
    2. Chen, Yao & Palma, Nuno & Ward, Felix, 2021. "Reconstruction of the Spanish money supply, 1492–1810," Explorations in Economic History, Elsevier, vol. 81(C).
    3. Georges Gallais‐Hamonno & Thi‐Hong‐Van Hoang & Kim Oosterlinck, 2019. "Price formation on clandestine markets: the case of the Paris gold market during the Second World War," Economic History Review, Economic History Society, vol. 72(3), pages 1048-1072, August.
    4. Yao Chen & Nuno Palma & Felix Ward, 2022. "Goldilocks: American precious metals and the Rise of the West," Tinbergen Institute Discussion Papers 22-063/VI, Tinbergen Institute, revised 15 Feb 2023.
    5. Nogues-Marco, Pilar, 2013. "Competing Bimetallic Ratios: Amsterdam, London, and Bullion Arbitrage in Mid-Eighteenth Century," The Journal of Economic History, Cambridge University Press, vol. 73(2), pages 445-476, June.
    6. James Vladimir Torres, 2019. "Bullion and Monetary Flows in the Northern Andes: New Evidence and Insights, 1780-1800," Tiempo y Economía, Universidad de Bogotá Jorge Tadeo Lozano, vol. 6(1), pages 13-45, February.

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    More about this item

    Keywords

    Bullionism;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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