Competition among banks and the pass-through of monetary policy

Jochen Güntner

Economic Modelling, 2011, vol. 28, issue 4, 1891-1901

Abstract: This paper introduces monopolistically competitive financial intermediaries into the New Keynesian DSGE setting. Modelling bank market power explicitly contributes to understanding two empirical facts: (i) The short-run transmission of changes in money market rates to bank retail rates is far from complete and heterogeneous. (ii) Stiffer competition among commercial banks implies that loan rates correlate more tightly with the policy rate. In my model, the degree of monopolistic competition in the banking sector has a sizeable impact on the pass-through of changes in the policy rate. In particular, a more competitive market for bank credit amplifies the efficiency of monetary policy.

Keywords: Monopolistically; competitive; banks; Collateral; External; finance; premium; Inside; money; premium (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (8)

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Working Paper: Competition among banks and the pass-through of monetary policy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:4:p:1891-1901

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