Purpose of the book

Increasing attention has in the last few years been devoted to the ‘credit view’ approach, which states that banks' assets are as important as banks' liabilities for the transmission of monetary disturbances to the real sector of the economy. Each chapter of this book may be interpreted as an investigation of one particular aspect of the interaction between credit and industry, with specific macroeconomic implications, related to the credit view.

Although the ‘creditist’ statement per se can be consistent with different theoretical approaches and has even been the object of orthodox contributions in the past, the relevance of banks' assets for the transmission of monetary shocks to the real economy relies, in general, on the assumption of imperfect substitution between bank credit and securities as a source of finance for industrial firms. In this sense, the ‘creditist’ macromodels are usually founded on the results of the literature concerned with the determination of the firm's optimal financial structure, and share many of the initial assumptions of that part of the New-Keynesian literature concerned with the macroeconomic implications of financial markets imperfections.

This work focuses on the following issues, which (in spite of having been almost completely neglected by the mainstream literature of monetary economics) play a very important theoretical and empirical role for the propositions of the credit view with regard to the non-neutrality of credit and the behaviour of the financial sector:

1. (a) macroeconomic relevance of the difference between ‘securitized’ and ‘bank-oriented’ financial systems

2. (b) macroeconomic implications of the (oligopsonistic) market power of industrial firms in the credit market

3. (c) liquidity preference of banks

4. (d) interactions and simultaneity between investment and finance decisions of the industrial firms.