Working Papers

2023-11 | April 2023


The Transmission of Negative Nominal Interest Rates in Finland

Author(s): Simon Kwan, Mauricio Ulate, and Ville Voutilainen

Despite the implementation of negative nominal interest rates by several advanced economies in the last decade and the many papers that have been written about this novel policy tool, there is still much we do not know about the effectiveness of this instrument. The pass-through of negative policy rates to loan rates is one of the main points of contention. In this paper, we analyze the pass-through of the ECB’s changes in the deposit facility rate to mortgage rates in Finland between 2005 and 2020. We use monthly data and three different empirical methodologies: correlational event studies, high-frequency identification, and exposure-measure regressions. We provide robust evidence that there continues to be pass-through of a cut in the policy rate to mortgage rates even when the policy rate is in negative territory, but that this pass-through is smaller than when the policy rate is in positive territory. The evidence in this paper contrasts with some previous studies and provides moments that can be useful to discipline theoretical negative-rates models.

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Article Citation

Kwan, Simon, Mauricio Ulate, and Ville Voutilainen. 2023. "The Transmission of Negative Nominal Interest Rates in Finland," Federal Reserve Bank of San Francisco Working Paper 2023-11. Available at