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Spending a Windfall

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  • Palma, Nuno
  • Silva, Andre C.

Abstract

We study the effect of the discovery of precious metals in America from 1500 to 1810 on international trade. Around 1500, there was a simultaneous discovery of precious metals and new trading routes. We construct a counterfactual of new routes but no precious metals. The discovery of precious metals increased the stock of precious metals more than tenfold. We show that Euro-Asian trade at its peak increased up to 20 times compared with the counterfactual. Our simulations match the observed price dynamics. We find that precious metals were at least as important as the new routes.

Suggested Citation

  • Palma, Nuno & Silva, Andre C., 2022. "Spending a Windfall," CEPR Discussion Papers 16523, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16523
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    • Nuno Palma & André C. Silva, 2024. "Spending A Windfall," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 283-313, February.

    References listed on IDEAS

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    More about this item

    Keywords

    International trade; Monetary injections; Early modern trade; Euro-asian trade; Real effects of money;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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