Abstract :
Repeatedinteractionsallowlenderstouncoverprivateinformationabouttheirclients,
decreasingtheinformationalasymmetrybetweenaborrowerandhislenderbut
introducingonebetweenthelenderandcompetingfinanciers.Thispaperconstructs
a credit-basedmodelofproductiontoanalyzehowlearningthroughlendingrelation-
ships affectsmonetarytransmission.Iexaminehowmonetarypolicychangesthe
incentivesofborrowersandlenderstoengageinrelationshiplendingandhowthese
changesthenshapetheresponseofaggregateoutput.Theresultsdemonstratethat
relationshiplendingprevailsinequilibrium,smoothesthesteadystateoutputprofile,
and induceslessvolatileresponsestocertainmonetaryshocks.
