Remarks on the Rate of Interest History
The Author analyses important historical statistics on the basis of which it is possible to visualise the movements of the long term rate of interest on the market of Genoa from the beginning of the XVI century to the beginning of the XVII century.
After an outline of the financial institutions of Genoa at the time, the Author analyses the long run movements of the rate of interest as they are perceived in the series of available statistics. The author individualises a period of high rate of interest from 1520 to 1570. Then follows a period from 1570 to 1620 when there is a strong downward trend in which the rate of interest from an average level of about 5.5 per cent goes down to an average level of about 2%.
Although the Author realises that general conclusions could be only tentative ones, he points out two general considerations.
The first one is primarily of historical interest. According to the Author throughout the Middle Ages the rate of interest even in the best organized financial markets never went below 4-5% for relatively long periods. But the period that goes from 1570 to 1620 saw a long and unusual downward trend of the long term rate of interest and Genoa then experienced for the first time the benefits of having for a long period the long term rate of interest below 3 %. The period which historians call the “price revolution
era” saw in fact a much more important “revolution” in the cost of money.
The second observation is primarily of economic interest. The experience of the period 1509-1620 shows that there was positive correlation between the long run movements of commodity-prices and the long run movements of the rate of interest.
The long run movements of the rate of interest during that period can be explained in terms of the supply-demand schedules of loanable funds. The period 1570-1610 offers however an interesting example of how shifts of the money-supply curve can modify the slope or/and the position of the supply and demand curve of loanable funds.
