This paper uses VAR analysis to illustrate that bank loans under commitment behave differently than loans not under commitment in response to a monetary shock. We find that firms use commitments more intensively after a monetary tightening and argue this helps explain the puzzling response of...

We explore the role of the cost channel in accounting for inflation persistence in the New Keynesian model with Calvo pricing. Hump-shaped responses of inflation to monetary shocks are obtained under purely nominal rigidities.