Historical Interest Rate Calculator

Introduction

Interest rates, or the price of money, are of fundamental economic importance. High interest rates make it more expensive to borrow and may discourage investment, while low interest rates reduce the return received by creditors and may act as a disincentive to saving. More widely, high interest rates are also seen as indicative of less developed economies lacking efficient financial markets, a description often applied to the Middle Ages. In addition, the rate of interest charged in any individual transaction will depend on particular factors, including the creditor's perception of the 'credit-worthiness' of the debtor. Variations in interest rates are thus of great historical significance, especially when comparing different economies, periods and the credit ratings of borrowers.

The treatment of interest rates in the historical literature is, however, inconsistent. Different historians have used differing ways of calculating and expressing interest rates. This can led to errors and confusion. The great variety in historical practice also makes it more difficult to draw compare data when analysing changing interest rates over time or the rates charged to particular borrowers and in particular situations. The aims of the current project are:

  1. to provide an easy-to-use but economically-rigorous online interest rate calculator;
  2. to facilitate comparative studies by establishing a standardised methodology and terminology for historical discussions of interest rates;
  3. to build up a dataset of historical interest rates, based on user input.