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Lending to the Borrower from HellDebt, Taxes, and Default in the Age of Philip II$
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Mauricio Drelichman and Hans-Joachim Voth

Print publication date: 2014

Print ISBN-13: 9780691151496

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691151496.001.0001

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The Sustainable Debts of Philip II

The Sustainable Debts of Philip II

(p.105) Chapter 4 The Sustainable Debts of Philip II
Lending to the Borrower from Hell

Mauricio Drelichman

Hans-Joachim Voth

Princeton University Press

This chapter addresses the sustainability of debt. A systematic analysis based on the International Monetary Fund's (IMF) methodology to evaluate fiscal sustainability shows that Castile was able to service its debts in the long run. While liquidity was scarce during periods of intense warfare, years of relative peace brought large surpluses. The data collected from Castile's annual fiscal accounts produced new yearly series of revenue, military expenditure, short-term debt issues, and short-term debt service. The resulting database spans a full 31-year period—enough to employ modern quantitative techniques. This analysis provides strong evidence that Castile's fiscal position in the second half of the sixteenth century was on a solid footing. The chapter then assesses whether the events that led to major downturns in Castile's financial fortunes could have been anticipated.

Keywords:   debt sustainability, International Monetary Fund, fiscal sustainability, Castile, liquidity, annual fiscal accounts, revenue, military expenditure, short-term debt

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