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

36 Pages Posted: 7 Jan 2015

See all articles by Adrian R. Bell

Adrian R. Bell

University of Reading - ICMA Centre

Chris Brooks

University of Reading - ICMA Centre

Tony K. Moore

University of Reading - ICMA Centre

Date Written: January 6, 2015

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

JEL Classification: F31, N13, N23

Suggested Citation

Bell, Adrian R. and Brooks, Chris and Moore, Tony K., The ‘Buying and Selling of Money for Time’: Foreign Exchange and Interest Rates in Medieval Europe (January 6, 2015). Available at SSRN: https://ssrn.com/abstract=2546003 or http://dx.doi.org/10.2139/ssrn.2546003

Adrian R. Bell

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Tony K. Moore

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
197
Abstract Views
1,281
rank
155,310
PlumX Metrics