We study liquidity effects and cost channels within a model of nominal rigidities and imperfect competition that gives explicit role for money-credit markets and investment decisions. We find that cost channels matter for monetary transmission, amplifying the impact of supply shocks and dampening the effects of demand shocks. Liquidity effects only obtain when the policy is specified by an interest rate policy rule and money-credit conditions are determined endogenously. We also find that determinacy issues are particularly relevant when models include the cost channel and explicit money-credit markets
