.6 -55.3 -53.1 -51.2 -49.6 -48.1 -46.5 -45.0 (Percent) Money and interest rates M3 (Finnish contribution to euro area, growth rate, e.o.p.) 1.8 6.1 … … … … … … … Finnish MFI euro area loans (growth rate, e.o.p.) 1.4 2.6 … … … … … … … Domestic nonfinancial private sector credit growth (e.o.p.) -2.6 2.4 4.8 4.6 4.6 4.5 4.3 4.0 3.9 3-month Euribor rate (percent) -0.3 -0.3 … … … … … … … 10-year government bonds yield 0
diminish bank profitability. Thus far, deposit rates have been able to adjust downwards, preserving bank profitability as lending rates decreased, but there is likely to be a lower bound below which disintermediation occurs. At the same time, Euribor-linked lending rates are likely to continue to decline; this would imply an adverse impact on bank profitability unless lending growth picks up sufficiently to offset diminishing interest margins. A recent simulation by the Bank of Portugal estimated that a 100 basis point fall in Euribor rates would have a negative
-Siegel factors from the yields-only model, the industrial production gap, domestic inflation rate, and EURCZK exchange rate gap as endogenous variables. We treat the intercept, the EUR industrial production gap, the domestic inflation target, the EUR inflation rate, the German 10Y government bond yield, and the 3M EURIBOR rate as exogenous variables. The exogenous variables are explaining the development of macro-economic and financial variables abroad. We also regard the domestic inflation target of the Czech National Bank as exogenous. For a small and open economy