Optimal monetary policy with the cost channel and monopolistically-competitive banks
Texas Tech University
New Keynesian model with cost channel (working capital), monopolistically-competitive banking sector with market power in deposit and loan markets, deposit and loan adjustment costs, and money-in-the-utility function with cash and deposits as i
intermediate firms: monopolistic competition with Rotemberg price adjustment costs; final firms: perfect competition with CES aggregation
Table 2 p.290
Perfect competition in deposit market, flexible deposits, sticky prices