Interest Rate Restrictions in a Natural Experiment: Loan Allocation and the Change in the Usury Laws in 1714  

Oleh:

Temin, Peter ; Voth, Hans-Joachim

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 118 no. 528 (Apr. 2008), page 743.
Topik: Interest Rate; Restrictions; Loan Allocation; Usury Laws; Pareto-Improving Social Insurance.
Fulltext: 743.pdf (184.53KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: EE28.28 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

This article studies the effects of interest rate restrictions on loan allocation. The British government tightened the usury laws in 1717, reducing the maximum permissible interest rate from 6% to 5%. A sample of individual loan transactions reveals that average loan size and minimum loan size increased strongly, while access o credit worsened for those with little 'social capital'. Collateralised credits, whichh had accounted for a declining share of total lending, returned to their former role of prominence. Ou r result suggest that the usury laws distorted credit markets significantly: we find the evidence that they offered a form of Pareto-improving social insurance.

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