The Interaction between the Financial System and the Real Economy

This report analyses how the financial system affects the real economy. The purpose of the report is to better understand and model how the financial system affects the real economy through various ‘transmission channels’. It is not intended to try to explain developments in financial markets as such or why financial crises occur. It is hoped that this report can both contribute to a better understanding of the effects of previous financial crises on the real economy and provide a better tool that can be used to analyse the impact of financial crisis in the future.