Working Paper: CEPR ID: DP16523
Authors: Nuno Palma; Andre C. Silva
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.
Keywords: International Trade; Monetary Injections; Early Modern Trade; Euroasian Trade; Real Effects of Money
JEL Codes: E40; F40; N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| discovery of precious metals (L72) | stock of precious metals in Europe (N23) |
| stock of precious metals in Europe (N23) | Euro-Asian trade (F19) |
| discovery of precious metals (L72) | Euro-Asian trade (F15) |
| discovery of precious metals (L72) | consumption of Asian goods in Europe (N93) |
| discovery of precious metals (L72) | changes in transportation costs (R41) |
| discovery of precious metals (L72) | endowments (D64) |
| Euro-Asian trade (F19) | price level of silver in Europe (N93) |