Usury Ceilings, Relationships and Bank Lending Behavior: Evidence From Nineteenth Century New York
- Tags:
- Bank,
- Borrower,
- Ceiling,
- Finance,
- Financial Accounting,
- Financial Services,
- Limit,
- National Bureau Of Economic Research
FREE Registration is required
Vendor Registration: $ Paid Download
Overview: 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 ceilings. 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.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 218KB | Date: Nov 2005 | Pages: 49
