Bank Interest Rates in a Small European Economy: Some Exploratory Macro Level Analyses Using Finnish Data

Bank of Finland Research Discussion Paper No. 9/2005

48 Pages Posted: 9 Sep 2005

Multiple version iconThere are 2 versions of this paper

Date Written: September 2005

Abstract

This paper presents econometric analyses on the determination of bank deposit and lending rates using longitudinal Finnish data. Interest rate pass-through is very strong, possibly complete, in the case of lending rates; in the case of deposit rates the pass-through is far from complete, even in the long term. The monetary union has benefited customers by decreasing the average rate on new loans. Credit and interest rate risk premiums are clearly observable in banks' lending rates. The impact of money market rates on loan stock rates seems to have been non-linear; no obvious explanation for this phenomenon has been found.

Keywords: Banking, interest rates

JEL Classification: G21, E43, E44

Suggested Citation

Kauko, Karlo, Bank Interest Rates in a Small European Economy: Some Exploratory Macro Level Analyses Using Finnish Data (September 2005). Bank of Finland Research Discussion Paper No. 9/2005, Available at SSRN: https://ssrn.com/abstract=794384 or http://dx.doi.org/10.2139/ssrn.794384

Karlo Kauko (Contact Author)

Bank of Finland ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

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