Large Banks, Loan Rate Markup and Monetary Policy

Discussion of “ Large Banks , Loan Rate Markup , and Monetary Policy ” ∗

Cuciniello and Signoretti (this issue, hereafter CS) provide a New Keynesian dynamic stochastic general equilibrium (NKDSGE) model with imperfect competition in the banking industry and collateral-constrained borrowers to address some important questions. How much does banking industry market structure amplify business cycles? How does strategic interaction between big banks and the central ban...

Global Knowledge, Local Solutions: Interest Rate and Monetary Policy

Crises and Rescues: Monetary Policy Transmission Through International Banks

We study the effects of the U.S. Federal Reserve’s Term Auction Facility (TAF) on globally active banks. We exploit a unique dataset with information on all foreign activities of German banks’ affiliates both, inand outside the US. All German parent banks with US affiliates tapped TAF liquidity, which mitigates self-selection concerns. This setting allows testing whether foreign affiliate activ...

House Prices, Heterogeneous Banks and Unconventional Monetary Policy Options

This paper develops a financial mechanism which integrates housing and the real economy through housing-secured debt. In this environment, movements in home prices are amplified through both borrowers and banks’ balance sheets, leading to a self-reinforcing credit/liquidity crunch. When placed within a traditional business cycle model, this financial structure quantitatively captures empirical ...

Competition among banks and the pass-through of monetary policy

This paper introduces monopolistically competitive banks into the New Keynesian DSGE setting. I find that this contributes to explaining three empirical facts: (i) The short-run transmission of changes in monetary policy to bank retail rates is far from complete and heterogeneous. Stiffer competition among commercial banks implies that (ii) retail interest rates correlate more tightly with mark...