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Bank interest rates in a small European economy: Some exploratory macro level analyses using Finnish data

Author

Listed:
  • Karlo Kauko

    (Bank of Finland)

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.

Suggested Citation

  • Karlo Kauko, 2005. "Bank interest rates in a small European economy: Some exploratory macro level analyses using Finnish data," Finance 0508020, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0508020
    Note: Type of Document - pdf; pages: 48. Bank of Finland Research Discussion Papers 9/2005
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0508/0508020.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    4. Gulan, Adam & Haavio, Markus & Kilponen, Juha, 2021. "Can large trade shocks cause crises? The case of the Finnish–Soviet trade collapse," Journal of International Economics, Elsevier, vol. 131(C).
    5. Machava, Agostinho, 2017. "The Macroeconomic Determinants of the Pass-Through from the Market Interest Rate to the Bank Lending Rate in Mozambique," Umeå Economic Studies 954, Umeå University, Department of Economics.
    6. Putkuri, Hanna, 2010. "Housing loan rate margins in Finland," Bank of Finland Research Discussion Papers 10/2010, Bank of Finland.
    7. Silvo, Aino & Verona, Fabio, 2020. "The Aino 3.0 model," Research Discussion Papers 9/2020, Bank of Finland.
    8. Kilponen, Juha & Orjasniemi, Seppo & Ripatti, Antti & Verona, Fabio, 2016. "The Aino 2.0 model," Research Discussion Papers 16/2016, Bank of Finland.
    9. Gulan, Adam & Haavio, Markus & Kilponen, Juha, 2014. "Kiss me deadly: From Finnish great depression to great recession," Research Discussion Papers 24/2014, Bank of Finland.
    10. Silvo, Aino & Verona, Fabio, 2020. "The Aino 3.0 model," Bank of Finland Research Discussion Papers 9/2020, Bank of Finland.
    11. Putkuri, Hanna, 2010. "Housing loan rate margins in Finland," Research Discussion Papers 10/2010, Bank of Finland.
    12. Kenneth J. Kopecky & David D. Van Hoose, 2012. "Imperfect Competition in Bank Retail Markets, Deposit and Loan Rate Dynamics, and Incomplete Pass Through," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(6), pages 1185-1205, September.
    13. Gulan, Adam & Haavio, Markus & Kilponen, Juha, 2014. "Kiss me deadly: From Finnish great depression to great recession," Bank of Finland Research Discussion Papers 24/2014, Bank of Finland.
    14. Kilponen, Juha & Orjasniemi, Seppo & Ripatti, Antti & Verona, Fabio, 2016. "The Aino 2.0 model," Bank of Finland Research Discussion Papers 16/2016, Bank of Finland.
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    16. repec:zbw:bofrdp:2010_010 is not listed on IDEAS
    17. Gulan, Adam & Haavio, Markus & Kilponen, Juha, 2021. "Can large trade shocks cause crises? The case of the Finnish–Soviet trade collapse," Journal of International Economics, Elsevier, vol. 131(C).

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    More about this item

    Keywords

    G21; E43; E44;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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