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The monetary transmission mechanism in Italy: the credit channel and a missing ring

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  • Roberto Tamborini
  • Riccardo Fiorentini

Abstract

Research on how money affects economic activity has revived interest in the socalled "credit view". In this paper we focus on current developments in the credit view in order to assess the results of the past decade's research and its legacy for macroeconomics and monetary policy. We expound the main models of the "credit channels" of monetary transmission, drawing a distinction between models of aggregate demand, which are predominant, and models of aggregate supply, which are less developed despite theory suggests a potential connection between credit conditions and firms' production activity. Each approach is accompanied by a survey of the main empirical results with particular reference to Italy, where bankfirm relations are traditionally regarded as particularly important.
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  • Roberto Tamborini & Riccardo Fiorentini, 2001. "The monetary transmission mechanism in Italy: the credit channel and a missing ring," Department of Economics Working Papers 0101, Department of Economics, University of Trento, Italia.
  • Handle: RePEc:trn:utwpde:0101
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    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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