Political Economy of Financial Regulation : Evidence from U.S. State Usury Laws in the 19th Century / Efraim Benmelech & Tobias J. Moskowitz.

Format:

Book

Author/Creator:

Benmelech, Efraim, author.

Moskowitz, Tobias J., author.

Series:

Working Paper Series (National Bureau of Economic Research) ; no. w12851.

NBER working paper series ; no. w12851

Language:

English

Subjects (All):

Finance--Law and legislation.

Finance.

Physical Description:

1 online resource (49 pages) : illustrations (black and white).

Place of Publication:

Cambridge, Massachusetts : National Bureau of Economic Research, 2007.

Summary:

We investigate the causes and consequences of financial regulation by studying the political economy of U.S. state usury laws in the 19th century. We find evidence that usury laws were binding and enforced and that lending activity was affected by rate ceilings. Exploiting the heterogeneity across states and time in regulation, enforcement, and market conditions, we find that regulation tightens when it is less costly and when it coexists with other economic and political restrictions that exclude certain groups. Furthermore, the same determinants of financial regulation that favor one group (and restrict others) are associated with higher (lower) future economic growth rates. The evidence suggests regulation is the outcome of private interests using the coercive power of the state to extract rents from other groups, highlighting the endogeneity of financial development and growth.

Notes:

Description based on publisher supplied metadata and other sources.