Spending a Windfall

56 Pages Posted: 22 Sep 2021 Last revised: 29 Mar 2022

See all articles by Nuno Pedro G. Palma

Nuno Pedro G. Palma

University of Manchester

Andre C. Silva

Nova School of Business and Economics

Date Written: September 2021


We study the effect of the discovery of precious metals in America on international trade from 1500 to 1810. Around 1500, there was a simultaneous discovery of precious metals and new trading routes. We construct a counterfactual scenario of new routes but no precious metals. The discovery of precious metals was a windfall to Europe. It increased the stock of precious metals in the world more than tenfold. Compared with the case of no trade routes and no precious metals, Euro-Asian trade increases up to 20 times. We find that American precious metals were at least as important as the new trading routes as a cause of observed trade patterns.

Keywords: early modern trade, Euro-Asian trade, international trade, monetary injections, real effects of money

JEL Classification: E40, F40, N10

Suggested Citation

Palma, Nuno Pedro G. and Silva, Andre C., Spending a Windfall (September 2021). CEPR Discussion Paper No. DP16523, Available at SSRN: https://ssrn.com/abstract=3928834

Nuno Pedro G. Palma (Contact Author)

University of Manchester ( email )

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

Andre C. Silva

Nova School of Business and Economics ( email )

Campus de Carcavelos
Carcavelos, 2775-405

HOME PAGE: http://sites.google.com/view/andredecastrosilva

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