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

Author

Listed:
  • Adam Brzezinski

    (Department of Economics, University of Oxford)

  • Yao Chen

    (Erasmus School of Economics, Erasmus University Rotterdam)

  • Nuno Palma

    (Department of Economics, University of Manchester; Instituto de Ciências Sociais, Universidade de Lisboa; CEPR)

  • Felix Ward

    (Erasmus School of Economics, Erasmus University Rotterdam)

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.

Suggested Citation

  • 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," Working Papers 0170, European Historical Economics Society (EHES).
  • Handle: RePEc:hes:wpaper:0170
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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. Leticia Arroyo Abad & Nuno Palma, 2020. "The Fruits of El Dorado: The Global Impact of American Precious Metals," Economics Discussion Paper Series 2003, Economics, The University of Manchester, revised May 2021.
    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. Nuno Palma, 2019. "American Precious Metals and their Consequences for Early Modern Europe," Working Papers 0174, European Historical Economics Society (EHES).
    4. Arteaga, Fernando & Desierto, Desiree & Koyama, Mark, 2020. "Shipwrecked by Rents," CEPR Discussion Papers 15300, C.E.P.R. Discussion Papers.
    5. Adam Brzezinski & Roberto Bonfatti & K. KıvançKaraman & Nuno Palma, 2020. "Monetary Capacity," Economics Series Working Papers 926, University of Oxford, Department of Economics.

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    More about this item

    Keywords

    Monetary Shocks; Natural Experiment; Nominal Rigidity; Financial Accelerator; DSGE; Minimum-Distance Estimation; Local Projection;
    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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