Research Discussion Papers, Bank of Finland
Bank interest rates in a small European economy: Some exploratory macro level analyses using Finnish data
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; (follow links to similar papers)
JEL-Codes: E43; E44; G21; (follow links to similar papers)
48 pages, May 11, 2005
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