Business cycles and monetary regimes in emerging economies: A role for a monopolistic banking sector

Arbeitspapier

This study shows that the presence of imperfect competition in the banking system propagates external shocks and amplifies the business cycle. Strategic limit pricing, aimed at protecting retail niches from potential competitors, generates countercyclical bank markups. Markup increments during recessions directly increase borrowing costs for firms and indirectly damage the financial position of firms’ balance sheets, increasing lenders’ risk perception. I use Bayesian techniques and data from Argentina to show that the inclusion of monopolistic banking improves the fit of the New Keynesian small open economy model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2006-17b

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Open Economy Macroeconomics ; International Financial Markets ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Monopoly; Monopolization Strategies
• Subject: small open economy ; countercylical bank markups ; exchange rate regimes ; Bayesian estimation ; balance sheet effect

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mandelman, Federico S.
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/70631
• Last update: 10.03.2025, 11:44 AM CET