We study liquidity effects and cost channels within a model of nominal rigidities and imperfect competition that gives explicit role for money-credit markets and investment decisions. We find that cost channels matter for monetary transmission, amplifying the impact of supply shocks and...

Financial intermediation and bank spreads are important elements in the analysis of business cycle transmission and monetary policy. We present a simple framework that introduces lending relationships, a relevant feature of financial intermediation that has been so far neglected in the monetary...