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