Usury ceilings, relationships, and bank lending behavior
Subtitle: evidence from nineteenth century
By: Howard Bodenhorn.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11734; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11734.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Usury -- New York (State) -- History -- 19th century.; Usury laws -- New York (State) -- History -- 19th century.; Bank loans -- New York (State) -- History -- 19th century.; Credit -- New York (State) -- History -- 19th century.
Description: "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"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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