Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
A large body of empirical evidence suggests that bank loan margins are countercyclical. We develop a model where a countercyclical spread arises due to the strategic interaction between large intermediariesi.e., banks whose individual behavior affects macroeconomic outcomesand the central bank. We uncover a new mechanism related to market power of banks which amplifies the impact of monetary and technology shocks on the real economy. The level of the spread is positively connected to the level of entrepreneurs leverage, and the amplification effect is stronger the more aggressive the central banks response to inflation.