Financial frictions have become fundamental for studying the business cycle and credit market dynamics. This work adds to the existing literature by introducing a search and matching scheme in the financial market into a cash in advance New Keynesian DSGE theoretical model. We provide an...

By introducing search and matching frictions in both the labor and the credit markets into a cash in advance New Keynesian DSGE model, we provide a novel explanation of the incomplete pass-through from policy rates to loan rates. We show that this phenomenon is ineradicable if banks possess some...

The interplay of imperfections in several markets is the new frontier of New Keynesian DSGE model research. Following a suggestion put forward by Wasmer and Weil (2004) in a partial equilibrium environment, we introduce search and matching frictions in both the labour and the financial markets...