Abstract

Lacking from most of the literature on the balance sheet channel is an integration of economic theory with empirical observation. We provide: (1) An account of the usefulness of the theoretical literature for interpreting the empirical research on the balance sheet channel; (2) Brief notes on some of the implications of the balance sheet channel; and (3) Suggestions for future research roadmap which integrates detailed empirical observation with relevant theory. Ultimately, this paper aims to evaluate what we can say with relative confidence about the balance sheet channel, given the evidence, and what we cannot say we have much confidence in at this point.

Key words: Balance sheet channel, integration of economic theory.