SUMMARY
There have been notable developments in monetary theory over the last twenty years which have done much to clarify the role of monetary variables in economic activity and the related “transmission mechanism” of monetary policy. Even so, there are still conflicting theories and correspondingly lively debates between their proponents. The present article, within a general framework of the mechanism of monetary policy, looks at the relation between the results of these developments and their successive approximations used in empirical analyses of the effects of monetary policy. The author puts forward an aggregated model of the Italian monetary sector designed for short-term forecasting and policy, and considers the results of the economic estimates, its predictive performance and its policy implications. JEL: E44, E47, E52