The evolution of Ottoman-European market linkages, 1469-1914: evidence from dynamic factor models

This paper studies the relationship between commodity markets in two key regions of the international economy during the 1469-1914 period: the Ottoman Empire and Europe. By providing evidence on what thus far has been largely a qualitative discussion, we propose the first comprehensive empirical analysis of the process of market integration between Istanbul and 19 European cities, using data on commodity baskets and a set of traded goods. By computing dynamic factor models using Bayesian inference we are able to overcome a series of data constraints, such as missing observations and small sample size. The results point to the existence of broad and persistent market linkages between the two regions throughout four and half centuries. We also find that market integration was negatively impacted by the intensity of Ottoman-European conflicts.