Title: Business cycles and monetary regimes in emerging economies
Description: "Starting from a variant of the New Keynesian model for a small open economy, I extend the  standard credit channel framework to show that the presence of imperfect competition in the banking  system propagates external shocks and amplifies the business cycle. This novel modeling of the banking  system captures various well-documented facts in developing economies. I show that strategic limit  pricing, aimed at protecting retail niches from potential competitors, generates countercyclical bank  markups. Markup increments, as a consequence of sudden capital outflows, end up increasing borrowing  costs for firms as well as damaging the financial position of firms' balance sheets. The recognition of  monopoly power in banking allows the model to account for the relatively high investment volatility  registered in emerging countries, even in the presence of debt that is fully denominated in local currency  and flexible exchange rates."--Federal Reserve Bank of Atlanta web site.