Spending a windfall

Nuno Palma, André C. Silva

Research output: Contribution to journalArticlepeer-review


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 10-fold. 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.

Original languageEnglish
JournalInternational Economic Review
Publication statusAccepted/In press - 2023


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