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The Sustainable Debts of Philip II: A Reconstruction of Castile's Fiscal Position, 1566-1596

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  • Drelichman, Mauricio
  • Voth, Hans-Joachim

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/revenue ratios were broadly unchanged across 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.

Suggested Citation

  • Drelichman, Mauricio & Voth, Hans-Joachim, 2007. "The Sustainable Debts of Philip II: A Reconstruction of Castile's Fiscal Position, 1566-1596," Economics working papers drelichman-07-11-06-09-33, Vancouver School of Economics, revised 08 Apr 2010.
    • Handle: RePEc:ubc:bricol:drelichman-07-11-06-09-33-37
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    File URL: http://mauricio.econ.ubc.ca/pdfs/DV_sustainable_debts.pdf
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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 2007-11-29 00:33:20

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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. 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.
    3. Adrian R. Bell & Chris Brooks & Tony K. Moore, 2014. "The credit relationship between Henry III and merchants of Douai and Ypres, 1247–70," Economic History Review, Economic History Society, vol. 67(1), pages 123-145, February.
    4. Mauricio Drelichman & Hans-Joachim Voth, 2008. "Debt Sustainability in Historical Perspective: The Role of Fiscal Repression," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 657-667, 04-05.
    5. Johnson, Noel D. & Koyama, Mark, 2017. "States and economic growth: Capacity and constraints," Explorations in Economic History, Elsevier, vol. 64(C), pages 1-20.
    6. 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.
    7. Drelichman, Mauricio & Hans-Joachim, Voth, 2015. "Returns to Investing in Sovereign Debt: a Response to Alvarez Nogal and Chamley," Economics working papers mauricio_drelichman-2015-, Vancouver School of Economics, revised 02 Sep 2015.
    8. Carlos álvarez-Nogal & Christophe Chamley, 2015. "Equity short-term finance under Philip II, with an option to long-term funded debt," Working Papers 0079, European Historical Economics Society (EHES).
    9. Mauricio Drelichman & Hans-Joachim Voth, 2013. "Contingent Sovereign Debt Contracts: The Historical Perspective," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(03), pages 28-32, October.
    10. Nicola Gennaioli & Hans-Joachim Voth, 2015. "State Capacity and Military Conflict," Review of Economic Studies, Oxford University Press, vol. 82(4), pages 1409-1448.
    11. Drelichman, Mauricio & Voth, Hans-Joachim, 2015. "Duplication without Constraints: Alvarez Nogal and Chamley’s Analysis of Debt Policy under Philip II," Economics working papers mauricio_drelichman-2015-, Vancouver School of Economics, revised 02 Sep 2015.
    12. Giulia Meloni & Johan Swinnen, 2022. "Globalization and political economy of food policies: Insights from planting restrictions in colonial wine markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(2), pages 766-787, June.
    13. 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.
    14. repec:ces:ifodic:v:11:y:2013:i:3:p:19099075 is not listed on IDEAS
    15. Mauricio Drelichman & Hans-Joachim Voth, 2016. "Duplication without constraints: Álvarez-Nogal and Chamley's analysis of debt policy under Philip II," Economic History Review, Economic History Society, vol. 69(3), pages 999-1006, August.
    16. Ã lvarez-Nogal, Carlos & Chamley, Christophe, 2016. "Philip Ii Against The Cortes And The Credit Freeze Of 1575-1577," Revista de Historia Económica / Journal of Iberian and Latin American Economic History, Cambridge University Press, vol. 34(3), pages 351-382, December.
    17. 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.
    18. Javier L. Arnaut, 2017. "Was Colonialism Fiscally Sustainable? An Empirical Examination of the Colonial Finances of Spanish America," Documentos de Trabajo (DT-AEHE) 1703, Asociación Española de Historia Económica.
    19. Freire Costa, Leonor & Münch Miranda, Susana & Nogues-Marco, Pilar, 2021. "Early modern financial development in the Iberian peninsula," Working Papers unige:147492, University of Geneva, Paul Bairoch Institute of Economic History.
    20. 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.
    21. 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.
    22. Christiaan Bochove, 2014. "External debt and commitment mechanisms: Danish borrowing in Holland, 1763–1825," Economic History Review, Economic History Society, vol. 67(3), pages 652-677, August.

    More about this item

    Keywords

    debt sustainability; serial defaults; early modern state finances;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • 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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