We extend the basic (representative-household) New Keynesian [NK] model ofthe monetary transmission mechanism to allow for a spread between the interestrate available to savers and borrowers, that can vary for either exogenous orendogenous reasons. We nd that the mere existence of a positive...

Improvements in information processing technology andderegulation, among other forces, are profoundlytransforming the financial sector of the United States and otheradvanced economies. Many of these changes are likely toimprove the efficiency of financial intermediation, in the sensethat the...

Much recent research has focused on the development and analysis of extensions of the New Keynesianframework that model labor market frictions and unemployment explicitly. The present paper describessome of the essential ingredients and properties of those models, and their implications for...