-term interest rates are accompanied by increases in bank credit; a phenomenon referred to as "the loan puzzle." This study … shock to short-term interest rates, the volume of bank credit to firms exhibits a positive and short-lived response but …

This paper integrates a money and credit market into a static approximation of the baseline New Keynesian model based … on a money-and-credit-in-the-utility approach, in which real balances and borrowing contribute to the household’s utility … the banking sector. Our approach gives rise to a credit channel, in which current and expected future interest rates on …