CEPII, Recherche et Expertise sur l'economie mondiale
The Primary Cause of European Inflation in 1500-1700: Precious Metals or Population? The English Evidence

Anthony Edo
Jacques Melitz

 Highlights :
  • There is an enduring controversy about the causes of the European inflation following the discovery of the Americas.
  • Historians tend to favor the view that the primary cause was population growth while economists strongly favor the view that it was precious metals instead.
  • Both views make good economic sense and are compatible.
  • An econometric test based on fresh English data strongly supports both explanations to an equal extent for 1500-1700.
  • The relevant precious metal is silver for 1500-1700, but if we extend the period to include 1450-1500, years of bimetallism in England, gold is as important as silver.

 Abstract :
We perform the first econometric test to date of the influences of inflows of precious metals and population growth on the “Great Inflation” in Europe following the discovery of the New World. The English evidence strongly supports the near-equivalent importance of both influences. For 1500-1700, silver is the only relevant precious metal in the estimates. The study controls for urbanization, government spending, mortality crises and climatic changes. The series for inflows of the precious metals into Europe from America and European mining are newly constructed based on the secondary sources.

 Keywords : The “Great Inflation” | Demography | Precious Metals | European Economic History 1500-1700

 JEL : E31, F00, J10, N13, N33

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  • CEPII Working Paper
    N°2019-10, October 2019

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     Fields of expertise

    Money & Finance