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Monetary policy implications on the investment decision: Do economies of scope in the banking sector matter?

Eleni Dalla

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: In this paper, we investigate the effectiveness of monetary policy, in the context of a theoretical model that captures both the banking and the firm behavior. Following the industrial organization approach to banking, the banking sector is described by a two-stage Cournot game with scope economies. On the other hand, the firm behavior concerns the investment decision which is explained using a second order accelerator model in discrete time. Considering the interbank rate and the reserve requirements as the instruments of monetary policy, it is demonstrated that its effectiveness depends on the type of scope economies in the oligopolistic banking sector..

Keywords: interbank rate; investment decision; reserve requirements; scope economies. (search for similar items in EconPapers)
JEL-codes: G21 L13 D92 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dcm, nep-mac and nep-mon
Date: 2017-03, Revised 2017-03
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Persistent link: https://EconPapers.repec.org/RePEc:mcd:mcddps:2017_05

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