Working Paper: CEPR ID: DP17919
Authors: Yao Chen; Nuno Palma; Felix Ward
Abstract: We estimate the contribution of the American precious metal windfall to West Europe’s growth performance in the early modern period. The exogenous nature of American precious metal extraction allows for the identification of monetary effects. We find that American precious metals fostered West Europe’s growth by stimulating trade and capital accumulation. Our findings place West Europe’s second-stage receivers in a particularly fortunate goldilocks zone that enjoyed monetary stimulus, while being insulated against the transport-loss induced financial crises that caused persistent damage to first-stage receiver Spain.
Keywords: Market Integration
JEL Codes: E51; F40; N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| American precious metals inflow (F29) | trade intensification (F15) |
| American precious metals inflow (F29) | capital formation (E22) |
| American precious metals inflow (F29) | liquidity constraints easing (E51) |
| American precious metals inflow (F29) | investments in agriculture (Q14) |
| American precious metals inflow (F29) | investments in education (I26) |
| American precious metals inflow (F29) | demographic changes (J11) |
| demographic changes (J11) | increased female employment opportunities (J21) |
| increased female employment opportunities (J21) | delayed marriages (J12) |
| delayed marriages (J12) | reduced birth rates (J11) |
| transport losses in Spain (L91) | financial crises (G01) |
| financial crises (G01) | hindered economic growth in Spain (N16) |
| American precious metals inflow (F29) | economic activity in West Europe (O52) |
| maritime disasters (H84) | economic outcomes (F61) |
| American precious metals inflow (F29) | West Europe's GDP growth (O52) |