DP12427 Some doubts about the economic analysis of the flow of silver to China in 1550-1820

Author(s): Jacques Melitz
Publication Date: November 2017
Keyword(s): silver flows into China 1550-1820, silver/gold exchange rates, transaction costs in international trade
JEL(s): F36, F60, N1, N15, N25
Programme Areas: Economic History, International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12427

The paper takes issue with the mainstream economic analysis of the enormous flow of silver into China in 1550-1820. First, I challenge the view that arbitrage between gold and silver in European trade with China was important except for one twenty-year spell. Next, I argue that had China imported gold, its history would have been much the same. I also dispute the idea that the persistence of the silver inflows from 1550 to 1820 implies any persistent disequilibrium, and I maintain that economic theory can easily accommodate the view that the inflow of silver into China sponsored growth in China.