We develop a dynamic, search-theoretic model of bank deposit and loan markets where relationships are bilateral, the demand for liquid assets is microfounded, and consumers are privately informed about their liquidity needs. As the policy rate rises, the deposit spread widens, and aggregate...

We study the foundations of firms' market power in a continuous-time model where agents are price-makers who interact explicitly with each other. Market power arises from the existence of rents, the size of which depends on consumers' outside options, and firms' ability to appropriate these...