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The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire

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  • Brzezinski, Adam
  • Chen, Yao
  • Palma, Nuno Pedro G.
  • Ward, Felix

Abstract

We exploit a recurring natural experiment to identify the effects of money supply shocks: maritime disasters in the Spanish Empire (1531-1810) that resulted in the loss of substantial amounts of monetary silver. A one percentage point reduction in the money growth rate caused a 1.3% drop in real output that persisted for several years. The empirical evidence highlights nominal rigidities and credit frictions as the primary monetary transmission channels. Our model of the Spanish economy confirms that each of these two channels explain about half of the initial output response, with the credit channel accounting for much of its persistence.

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  • Brzezinski, Adam & Chen, Yao & Palma, Nuno Pedro G. & Ward, Felix, 2019. "The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire," CEPR Discussion Papers 14089, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14089
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    1. The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire
      by Christian Zimmermann in NEP-DGE blog on 2019-11-22 17:14:55

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    Cited by:

    1. Chen, Yao & Palma, Nuno & Ward, Felix, 2021. "Reconstruction of the Spanish money supply, 1492–1810," Explorations in Economic History, Elsevier, vol. 81(C).
    2. Carlos J. Charotti & Nuno Palma & João Pereira dos Santos, 2022. "American Treasure and the Decline of Spain," Economics Discussion Paper Series 2201, Economics, The University of Manchester.
    3. Arteaga, Fernando & Desierto, Desiree & Koyama, Mark, 2020. "Shipwrecked by Rents," CEPR Discussion Papers 15300, C.E.P.R. Discussion Papers.
    4. Adam Brzezinski & Roberto Bonfatti & K. KıvançKaraman & Nuno Palma, 2020. "Monetary Capacity," Economics Series Working Papers 926, University of Oxford, Department of Economics.
    5. Leticia Arroyo Abad & Nuno Palma, 2020. "The Fruits of El Dorado: The Global Impact of American Precious Metals," Working Papers 0179, European Historical Economics Society (EHES).
    6. Nuno Palma, 2019. "American Precious Metals and their Consequences for Early Modern Europe," Working Papers 0174, European Historical Economics Society (EHES).

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    More about this item

    Keywords

    DSGE; financial accelerator; Local projection; minimum-distance estimation; Monetary shocks; Natural Experiment; Nominal Rigidity;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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