Goldilocks: American Precious Metals and the Rise of the West

ABSTRACT We estimate the contribution of the American precious metal windfall to Western Europe's growth performance in the early modern period. The exogenous nature of American precious metal extraction allows for the identification of monetary effects. We find that American precious metals fostered Western Europe's growth by stimulating trade and capital accumulation. Our findings place Western Europe's second‐stage receivers in a particularly fortunate goldilocks zone that enjoyed monetary stimulus, while being insulated against the transport‐loss induced financial crises that caused persistent damage to first‐stage receiver Spain.