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Evading the 'Taint of Usury' Complex Contracts and Segmented Capital Markets

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Author Info
Mark Koyama

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Abstract

What were the economic consequences of the usury doctrine in the Middle Ages? We examine how merchants attempted to evade the prohibition on interest and the attempts of the Church to clamp down on evasion. Contrary to the views of many economists and historians, the usury prohibition imposed different transaction costs on medieval merchants: increasing the cost of using capital markets for some merchants more than for others. Since only a subsection of the merchant population were able to write licit contracts, the prohibition had the effect of segmenting markets in which formal credit was important.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 412.

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Date of creation: 2008
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Handle: RePEc:oxf:wpaper:412

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Related research
Keywords: Usury; Transaction Costs; Contracts;

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Find related papers by JEL classification:
N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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