The Real Effects of Monetary Expansions: Evidence from a Large-scale Historical Experiment

• 成果类型: Article
• 署名作者: Palma, Nuno
• 署名单位: University of Manchester; Universidade de Lisboa; Institute of Social Sciences, University of Lisbon (ICS-UL); Centre for Economic Policy Research - UK
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdab042
• 发表日期: 2022
• 页码: 1593-1627
• 关键词: great divergence; ECONOMIC-GROWTH; quantity theory; long-run; POLICY; money; identification; credit; shocks; gold

摘要

The discovery of massive deposits of precious metals in America during the early modern period caused an exogenous monetary injection to Europe's money supply. I use this episode to identify the causal effects of money. Using a panel of six European countries, I find that monetary expansions had a material impact on real economic activity. The magnitudes are substantial and persist for a long time: an exogenous 10% increase in the production of precious metals in America measured relative to the European stock leads to a front-loaded response of output and, to a lesser extent, inflation. There was a positive hump-shaped response of real GDP, with a cumulative increase up to 0.9% six to nine years later. The evidence suggests that this is because prices responded to monetary injections with considerable lags.