English, Article, Journal or magazine article edition: Financial Repression in a Natural Experiment: Loan Allocation and the Change in the Usury Laws in 1714 Joachim Voth; Peter Temin

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Financial Repression in a Natural Experiment: Loan Allocation and the Change in the Usury Laws in 1714
Author
  • Joachim Voth
  • Peter Temin
Physical Description
  • preprint
Notes
  • If financial deepening aids economic growth, then financial repression should be harmful. We use a natural experiment – the change in the English usury laws in 1714 – to analyze the effects of interest rate restrictions. We use a sample of individual loan transactions to demonstrate how the reduction of the legal maximum rate of interest affected the supply and demand for credit. Average loan size and minimum loan size increased strongly, and access to credit worsened for those with little ‘social capital.’ While we have no direct evidence that loans were misallocated, the discontinuity in loan receipts makes this highly likely. We conclude that financial repression can undermine the positive effects of financial deepening.
  • Economic development, banking, financial repression, usury laws, credit rationing, natural experiments, lending decisions
  • RePEc:upf:upfgen:858
Language
  • English
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