Interest Rate Caps and Credit Supply: Locking Out the Small Borrower in the Great Depression

Haelim Anderson and Matthew Jaremski

No 34277, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Interest rate caps are a contentious tool with limited causal evidence. We study New Jersey during the Great Depression, when the cap on small loan brokers was reduced and then raised within three years. Novel archival data show that the lower cap substantially reduced broker lending relative to banks, while the relaxation partially reversed the decline even as the Depression deepened. The lower cap disproportionately drove out brokers that charged higher rates, shrinking the market and increasing concentration. Because banks did not expand to replace the lost broker loans, the cap substantially reduced credit for the most vulnerable borrowers.

JEL-codes: G01 G21 G28 N12 N22 (search for similar items in EconPapers)
Date: 2025-09
New Economics Papers: this item is included in nep-fdg and nep-his
Note: DAE
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w34277.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:34277

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w34277
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().