@techreport{Wollmershauser2006Bank,
abstract = {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 adjustment of the aggregate loan rate to a monetary policy
shock is sticky. We estimate the model for the Euro area by adopting a
minimum distance approach. Our findings exhibit that, first, frictions on
the loan market influence the propagation of monetary policy shocks as
the pass-through of a change in the money market rate to the loan rate
is incomplete, and, second, the cost channel is operating, but the effect
is weak since inflation is driven by real unit labor costs rather than the
loan rate. Our main conclusion is that the strength of the cost channel is
mitigated as banks shelter firms from monetary policy shocks by smoothing
lending rates.},
author = {Timo Wollmersh\"{a}user and Eric Mayer and Oliver H\"{u}lsewig},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {E44; E52; E58; 330; Bank behavior; cost channel; minimum distance estimation},
language = {eng},
number = {71},
title = {Bank Behavior and the Cost Channel of Monetary Transmission},
type = {W\"{u}rzburg economic papers},
url = {http://hdl.handle.net/10419/22364},
year = {2006}
}
