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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
  • Ward, Felix

Abstract

We estimate the effect of money supply changes on the real economy by exploiting a recurring natural experiment: maritime disasters in the Spanish Empire (1531–1810) that resulted in the loss of substantial amounts of silver money. We find that negative money supply shocks caused Spanish real output to decline. A transmission channel analysis highlights slow price adjustments and credit frictions as mechanisms through which money supply changes affected the real economy. Especially large output declines occurred in textile manufacturing against the backdrop of a credit crunch that impaired merchants’ ability to supply their manufacturers with inputs.

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  • Brzezinski, Adam & Chen, Yao & Palma, Nuno & Ward, Felix, 2024. "The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire," LSE Research Online Documents on Economics 125472, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:125472
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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. 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. Chen, Yao & Palma, Nuno & Ward, Felix, 2021. "Reconstruction of the Spanish money supply, 1492–1810," Explorations in Economic History, Elsevier, vol. 81(C).
    4. Arteaga, Fernando & Desierto, Desiree & Koyama, Mark, 2024. "Shipwrecked by rents," Journal of Development Economics, Elsevier, vol. 168(C).
    5. Nuno Palma, 2019. "American Precious Metals and their Consequences for Early Modern Europe," Working Papers 0174, European Historical Economics Society (EHES).
    6. 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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