Brzoza-Brzezina, Michał; Makarski, Krzysztof - In: Journal of International Money and Finance 30 (2011) 7, pp. 1406-1428
We construct an open-economy DSGE model with a banking sector to analyze the impact of the recent credit crunch on a small open economy. In our model the banking sector operates under monopolistic competition, collects deposits and grants collateralized loans. Collateral effects amplify monetary...