This thesis presents research on the role of money and credit in economic fluctuations and the hypothesis of a credit channel in the transmission of monetary policy

Part one is an empirical analysis of the postwar U.S. business cycle, based on structural vector autoregressions that account for shocks to credit supply and demand. These shocks are shown to contribute to cycles, but the credit channel hypothesis receives no support

Part two is an empirical analysis of monetary transmission in Germany, which employs vector autoregressions on data disaggregated by sector. The results indicate that transmission is sector-specific, but again provide no evidence for a credit channel

Part three is theoretical and derives a cum-credit analogue to the Mundell-Fleming model. It demonstrates that there is no credit channel in the small open economy, but that credit shocks can cause output fluctuations under fixed and currency fluctuations under flexible exchange rates