The ‘Buying and Selling of Money for Time’: Foreign Exchange and Interest Rates in Medieval Europe

Adrian Bell, Chris Brooks and Tony K. Moore
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Tony K. Moore: ICMA Centre, Henley Business School, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: This paper will show how the relatively voluminous surviving records about exchange rates in the middle ages can help to illuminate the much murkier question of medieval interest rates. We will first explain how the medieval FX market operated and its links to the money market. Next, we will set out the sources of our data on medieval exchange rates, the methodology for calculating interest rates from these exchange rates and provide our results for some key financial centres. These will be used to answer two fundamental questions: first, did the relationship between exchange rates include an element of interest and could FX transactions therefore be used to circumvent the usury prohibition? Second, what were the levels of interest charged on commercial loans in the Middle Ages and how did these compare to rates on government debt and consumer credit? We will also explore some distinctive seasonal patterns in these interest rates at different financial centres and show how these relate to wider trade flows. Finally, we will consider the significance of our findings for the current debate over whether there was a long-term halving of the risk-free interest rate after c.1350.

Keywords: interest rates; exchange rates; Medieval England; usury; money market (search for similar items in EconPapers)
JEL-codes: F31 N13 N23 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-his
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: 'Buying and Selling of Money for Time': Foreign Exchange and Interest Rates in Medieval Europe (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:rdg:icmadp:icma-dp2015-01

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