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The sustainable debts of Philip II: A reconstruction of Castile's fiscal position, 1566-1596

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  • Mauricio Drelichman
  • Joachim Voth

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Abstract

The defaults of Philip II have attained mythical status as the origin of sovereign debt crises. We reassess the fiscal position of Habsburg Castile, deriving comprehensive estimates of revenue, debt, and expenditure from new archival data. The king’s debts were sustainable. Primary surpluses were large and rising. Debt-to-revenue ratios remained broadly unchanged during Philip’s reign. Castilian finances in the sixteenth century compare favorably with those of other early modern fiscal states at the height of their imperial ambitions, including Britain. The defaults of Philip II therefore reflected short-term liquidity crises, and were not a sign of unsustainable debts.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1121.

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Date of creation: Dec 2006
Date of revision: May 2009
Handle: RePEc:upf:upfgen:1121

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Debt sustainability; Early modern economic history; Philip II; State borrowing; Debt overhang; tax reform;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. December 3 Economic History Seminar: The Sustainable Debts of Philip II
    by Brad DeLong in Grasping Reality with the Invisible Hand on 2007-11-28 18:33:20
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Cited by:
  1. Mauricio Drelichman & Joachim Voth, 2007. "Lending to the borrower from hell: Debt and default in the age of Philip II, 1556-1598," Economics Working Papers 1164, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2009.
  2. Drelichman, Mauricio & Voth, Hans-Joachim, 2011. "Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600," Explorations in Economic History, Elsevier, vol. 48(1), pages 1-19, January.
  3. Joachim Voth & Mauricio Drelichman, 2008. "Debt sustainability in historical perspective: The role of fiscal repression," Economics Working Papers 1184, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Nicola Gennaioli & Joachim Voth, 2011. "State capacity and military conflict," Economics Working Papers 1294, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2013.
  5. Drelichman, Mauricio & Voth, Hans-Joachim, 2011. "Funding Empire: Risk, Diversification, and the Underwriting of Early Modern Sovereign Loans," Economics working papers mauricio_drelichman-2011-, Vancouver School of Economics, revised 06 Jul 2011.
  6. Mauricio Drelichman & Hans‐Joachim Voth, 2011. "Lending to the Borrower from Hell: Debt and Default in the Age of Philip II," Economic Journal, Royal Economic Society, vol. 121(557), pages 1205-1227, December.
  7. Koen Deconinck & Johan F.M. Swinnen, 2012. "War, Taxes, and Borders:How Beer Created Belgium," LICOS Discussion Papers 30812, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  8. Mauricio Drelichman & Hans-Joachim Voth, 2013. "Contingent Sovereign Debt Contracts: The Historical Perspective," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 11(3), pages 28-32, October.

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