Credit Market Imperfections, Financial Structure and Economic Activity : An Overview of Empirical Findings

In the last decade, a renewed debate on the monetary transmission mechanism has emerged. Recent empirical works analyse the response of financial and real variables to shifts in monetary policy and interpret its implication for the nature of the monetary transmission mechanism. Both, money and credit appear as vehicles for transmitting monetary impulses rather than separate sources of such fluctuations. However, these channels of monetary transmission (may) differ by sector. Credit market imperfections can explain this different behavior across sectors. A better understanding of the financial propagation mechanism can be provided by firm level data.