The behavioral agent-based framework of De Grauwe and Gerba (2015) is extended to allow for a counterfactual exercise on the role of corporate finance arrangements for monetary transmission. Two alternative firm financial frictions are independently introduced: market-based and bank-based. We…
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The recent financial crisis has renewed the interest of economists, both at the theoretical and empirical level, in developing a better understanding of credit and its mechanisms. A rapidly growing strand of the literature views banks as facing funding restrictions that…
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As Freixas and Rochet (1997) mention, in perfect competition the optimal choice for banks is determined by the point where intermediation margins are equal to operating costs. In this scenario, market equilibrium is not affected by a bank’s actions. In contrast, when a bank has market power, it…
