We propose a model in which the evolution of interest rate margin (markup) in banking is the outcome of two major components: (i) dynamic oligopolistic conduct and (ii) dynamics of market fundamentals. The model is specified such that oligopolistic dynamics are separated from the dynamics of...

How long does it take for the stock of financial intermediation capital to return to its optimal, profit maximizing, level following a severe shock, and what is the mechanism that governs it? We introduce a dynamic neoclassical model of capital structure that is governed by the process of...