We show that the response of banks' net interest margin (NIM) to monetary policy shocks is state dependent. Following a period of low (high) Federal Funds rates, a contractionary monetary policy shock leads to an increase (decrease) in NIM. Aggregate economic activity exhibits a similar...

A common practice in estimating parameters in DSGE models is to nd a set that when simulated gets close to an average of certain data moments; the model s simulated performance for other moments is then compared to the data for these as an informal test of the model. We call this procedure...