Cambium Non Est Mutuum: Exchange and Interest Rates in Medieval Europe

24 Pages Posted: 20 Apr 2017

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: May 2017

Abstract

A major gap in our understanding of the medieval economy concerns interest rates, especially relating to commercial credit. Although direct evidence about interest rates is scattered and anecdotal, there is much more surviving information about exchange rates. Since both contemporaries and historians have suggested that exchange and rechange transactions could be used to disguise the charging of interest in order to circumvent the usury prohibition, it should be possible to back out implied interest rates from exchange rates. The analysis presented in this article is based on a new dataset of medieval exchange rates collected from commercial correspondence in the archive of Francesco di Marco Datini of Prato, c. 1383–1411. It demonstrates that the time value of money was consistently incorporated into market exchange rates. Moreover, these implicit interest rates are broadly comparable to those received from other types of commercial loan and investment. Although on average profitable, the return on any individual exchange and rechange transaction did involve a degree of uncertainty that may have justified their non‐usurious nature. However, there were also practical reasons why medieval merchants may have used foreign exchange transactions as a means of extending credit.

Suggested Citation

Bell, Adrian R. and Brooks, Chris and Moore, Tony K., Cambium Non Est Mutuum: Exchange and Interest Rates in Medieval Europe (May 2017). The Economic History Review, Vol. 70, Issue 2, pp. 373-396, 2017. Available at SSRN: https://ssrn.com/abstract=2955397 or http://dx.doi.org/10.1111/ehr.12374

Adrian R. Bell (Contact Author)

University of Reading - ICMA Centre ( email )

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

Chris Brooks

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

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