Nonlinear modeling of medieval interest-rate trends

Establish whether nonlinear relationships between trend strength and subsequent returns exist in annual interest-rate data dating back to the 14th century across horizons from 2 to 128 years, beyond the confirmed linear mean-reversion, by performing more refined nonlinear regression analyses.

Background

Using annual interest-rate data from medieval Europe, the authors confirm via linear regression that multi-decade interest-rate trends tend to revert. This aligns with economic intuition and extends evidence of mean reversion to very long historical horizons.

However, the limited quantity and quality of medieval data preclude more refined nonlinear regression analyses, leaving open whether higher-order trend–return relationships (e.g., cubic effects) characterize interest-rate dynamics over centuries.