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The term price revolution refers to the relatively high rate of inflation that characterized the period from the first half of the 16th century to the first half of the 17th, across Western Europe, with prices on average rising perhaps sixfold over 150 years. This level of inflation amounts to 1-1.5% per year, a relatively low inflation rate for the 20th century standards, but rather high given the monetary policy in place in the 16th century.
Generally it is thought that this high inflation was caused by the large influx of gold and silver from the Spanish treasure fleet from the New World, especially the silver of Bolivia and Mexico which began to be mined in large quantities from 1545 onward. According to this theory, too many people with too much money chased too few goods. Other accounts emphasize the role of urbanization which increased the velocity of money in circulation, or the increase in silver production within Europe itself, which took place at the end of the 15th and beginning of the 16th centuries.
Demographic factors may have contributed to upward pressure on prices, with the revival (from around the third quarter of the 15th century) of European population growth after the century of depopulation and demographic stagnation that had followed the Black Death. The price of food rose sharply during epidemic years, then began to fall very rapidly as there were fewer mouths to feed. At the same time prices of manufactured goods tended to rise because of dislocation of supply. Later on, increased population placed greater demands on an agricultural area that had contracted significantly after the 1340s, or had been converted from arable to less intensive livestock production.
The inflation of c.1520-1640 eventually petered out with the end of the initial rush of New World bullion, though prices remained around or slightly below the levels of the first half of the 17th century until the onset of new inflationary pressures in the latter decades of the 18th century.
- John Munro: The Monetary Origins of the 'Price Revolution':South Germany Silver Mining, Merchant Banking, and Venetian Commerce, 1470-1540, Toronto 1999