The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire

80 Pages Posted: 15 Nov 2019

See all articles by Adam Brzezinski

Adam Brzezinski

University of Oxford

Yao Chen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Nuno Pedro G. Palma

University of Manchester

Felix Ward

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: October 2019

Abstract

We exploit a recurring natural experiment to identify the effects of money supply shocks: maritime disasters in the Spanish Empire (1531-1810) that resulted in the loss of substantial amounts of monetary silver. A one percentage point reduction in the money growth rate caused a 1.3% drop in real output that persisted for several years. The empirical evidence highlights nominal rigidities and credit frictions as the primary monetary transmission channels. Our model of the Spanish economy confirms that each of these two channels explain about half of the initial output response, with the credit channel accounting for much of its persistence.

Keywords: DSGE, financial accelerator, Local projection, minimum-distance estimation, Monetary shocks, Natural Experiment, Nominal Rigidity

JEL Classification: E43, E44, E52, N10, N13

Suggested Citation

Brzezinski, Adam and Chen, Yao and Palma, Nuno Pedro G. and Ward, Felix, The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire (October 2019). CEPR Discussion Paper No. DP14089, Available at SSRN: https://ssrn.com/abstract=3486240

Adam Brzezinski (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Yao Chen

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Nuno Pedro G. Palma

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Felix Ward

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
345
PlumX Metrics