Usury Ceilings, Relationships and Bank Lending Behavior: Evidence from Nineteenth Century / Howard Bodenhorn.

Format:

Book

Author/Creator:

Bodenhorn, Howard.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11734.

NBER working paper series no. w11734

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Usury Ceilings, Relationships and Bank Lending Behavior

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

Few pieces of economic regulation are ubiquitous as usury limits. Similarly, few economic principles are as widely accepted as the belief that interference with freely contracted prices leads to market distortions, and many studies of financial markets find that usury limits negatively affect credit availability. This study shows that when no regulatory authority monitors and stands ready to punish violators of the usury limit when intermediaries and borrowers form long-term relationships, banks and borrowers regularly contract for interest rates in excess of the usury ceiling. Time series analysis reveals limited effects on credit availability when market rates exceed the usury ceiling. Cross-sectional analysis of individual loan contracts also shows that the positive effect of a long-term relationship offsets the negative effect of the usury limit on credit availability.

Notes:

Print version record

November 2005.