Munich Personal RePEc Archive

Bank Behavior in Oligopoly, Bank- Clients and Monetary Policy

dala, eleni and karpetis, christos and varelas, erotokritos (2013): Bank Behavior in Oligopoly, Bank- Clients and Monetary Policy.

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Abstract

This paper investigates the impact of monetary policy on the optimal bank behavior under oligopolistic conditions. In addition, we attempt to extend this analysis in the sphere of bank-clients behavior.We concentrate on the way the minimum reserve requirements of commercial banks influence the optimal bank behavior in oligopoly. In particular, we are interested in the influence of this instrument of monetary policy on the interest rate spread. For this reason, we formulate a two-stage Cournot game with scope economies.We conclude that the sign of each change depends on the type of scope economies. Finally, treating an overlapping generation model as a guiding principle, we show that the minimum reserve requirements of commercial banks have an impact on the depositors’ and borrowers’ two periods’ optimal level of consumption.

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