NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Usury Ceilings, Relationships and Bank Lending Behavior: Evidence from Nineteenth Century

Howard Bodenhorn

NBER Working Paper No. 11734
Issued in November 2005
NBER Program(s):   DAE

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.

download in pdf format
   (218 K)

email paper

This paper is available as PDF (218 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11734

Published: Bodenhorn, Howard, 2007. "Usury ceilings and bank lending behavior: Evidence from nineteenth century New York," Explorations in Economic History, Elsevier, vol. 44(2), pages 179-202, April.

Users who downloaded this paper also downloaded these:
Rockoff w9742 Prodigals and Projecture: An Economic History of Usury Laws in the United States from Colonial Times to 1900
Glaeser and Scheinkman w4954 Neither a Borrower nor a Lender Be: An Economic Analysis of Interest Restrictions and Usury Laws
Benmelech and Moskowitz w12851 The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century
Becker Crime and Punishment: An Economic Approach
Calomiris and Pornrojnangkool w12622 Relationship Banking and the Pricing of Financial Services
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us