MACRO-FINANCE LINKAGES.

In this survey, I review the academic and policy-oriented literature on the linkages between financial markets and the rest of the economy. First, I summarize the leading economic theories for why the financial sector can influence the macroeconomy. Second, I consider empirical research on spillovers from the financial sector to the rest of the economy, as well as across financial markets in different countries. Third, I discuss key monetary policy debates regarding the appropriate response of central banks to financial conditions. Finally, I conclude with an overview of the major gaps in the existing literature. [ABSTRACT FROM AUTHOR]