The Price Revolution in the 16th Century: Empirical Results from a Structural Vectorautoregression Model

This paper provides empirical evidence in favor of the hypothesis thatthe secular price increase in the 16th century is mainly caused by money supplydevelopments as the discovery of new mines in Latin America. First we reviewprice developments for several European countries over the 16th century in thelight of this hypothesis. Second the application of a SVAR model to annual timeseries of price indexes for Old Castile and Leon and New Castile over the 16thcentury indicates that not only the trend but also the short to medium variability ofprice movements in 16th century Spain are dominated by permanent moneysupply shocks.