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

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Author Info
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.

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File URL: http://129.3.20.41/eps/fin/papers/0508/0508020.pdf
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Paper provided by EconWPA in its series Finance with number 0508020.

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Length: 48 pages
Date of creation: 31 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0508020

Note: Type of Document - pdf; pages: 48. Bank of Finland Research Discussion Papers 9/2005
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Web page: http://129.3.20.41

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Related research
Keywords: G21; E43; E44;

Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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  1. Richard J. Rosen, 2003. "Banking market conditions and deposit interest rates," Working Paper Series WP-03-19, Federal Reserve Bank of Chicago. [Downloadable!]
  2. Sander,Harald & Kleimeier,Stefanie, 2003. "Convergence in Eurozone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition and integration," Research Memoranda 051, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
    Other versions:
  3. Solange Berstein J. & Rodrigo Fuentes S., 2003. "From Policy Rates to Bank Lending Rates: The Chilean Banking Industry," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 6(1), pages 49-67, April. [Downloadable!]
  4. Paul Mizen & Boris Hofmann, . "Base rate pass-through: evidence from banks' and building societies' retail rates," Bank of England working papers 170, Bank of England. [Downloadable!]
  5. Timothy H. Hannan & Robin A. Prager, 2001. "The competitive implications of multimarket bank branching," Finance and Economics Discussion Series 2001-43, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  6. Rodrigo Fuentes & Solange Berstein, 2004. "Concentration and Price Rigidity: Evidence for the deposit Market in Chile," Econometric Society 2004 Latin American Meetings 67, Econometric Society. [Downloadable!]
    Other versions:
  7. Leonardo Gambacorta, 2004. "How Do Banks Set Interest Rates?," NBER Working Papers 10295, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Ignazio Angeloni & Michael Ehrmann, 2003. "Monetary policy transmission in the euro area: any changes after EMU?," Working Paper Series 240, European Central Bank. [Downloadable!]
  9. Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September. [Downloadable!] (restricted)
    Other versions:
  10. Hutchison, David E, 1995. "Retail Bank Deposit Pricing: An Intertemporal Asset Pricing Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 217-31, February. [Downloadable!] (restricted)
  11. Canhoto, Ana, 2004. "Portuguese banking: A structural model of competition in the deposits market," Review of Financial Economics, Elsevier, vol. 13(1-2), pages 41-63. [Downloadable!] (restricted)
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