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This paper presents a New Keynesian model that dwells on the role of banks in the cost channel of monetary policy. Banks extend loans to firms in an environment of monopolistic competition by setting the loan rate according to a Calvo-type staggered price setting approach, which means that the...
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"We study the relationship between banking competition and the transmission of monetary policy through the bank lending … analysis, we are able to reaffirm the existence of the bank lending channel of monetary transmission. Moreover, we find that …
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