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Consumption habits and interest rate rigidity
In this paper we provide a micro model of loans which the lender is a monopolistic bank and the borrower is a competitive consumer with consumption habits who may default on part of his debt. In this setting, we prove that the loan demand curve is kinked and therefore it is possible to find interest rate rigidity in equilibrium as well as asymmetric response of loans to interest rate variations. Finally, we show through an example that the credit supply, as a function of the marginal cost ofdoi:10.1590/s0101-41612011000300002 fatcat:l3ckpi744nf7zirrllxjaryvta