Monetary policy and market power in banking

Linda Toolsema-Veldman*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)


Applying a spatial competition model to banking, we analyze the effects of the choice of a monetary policy rule by the central bank on banks' market power as measured by the Lerner index. We show that a procyclical monetary policy may reinforce the countercyclical movement of the Lerner index. That is, this measure of competitiveness of the banking sector may Vary more over the business cycle due to the monetary policy rule.

Original languageEnglish
Pages (from-to)71-83
Number of pages13
JournalJournal of Economics
Issue number1
Publication statusPublished - Sep-2004

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