This article by Mark Gertler provides an overview of the relationship between financial structure and aggregate economic activity. It surveys both traditional and new research, highlighting the evolving understanding of how financial markets influence macroeconomic outcomes. The paper begins by noting that traditional macroeconomic theory often abstracts from financial considerations, assuming the financial system functions smoothly. However, recent developments have led to a renewed interest in the role of financial factors in economic behavior. The article traces the historical development of this field, starting with the Great Depression, where financial system failures were seen as a key factor in economic downturns. Fisher and Keynes both emphasized the importance of financial considerations in economic activity, though Keynes focused more on liquidity and money, while Fisher highlighted the role of debt and deflation. The monetarist revolution, led by Friedman and Schwartz, further emphasized the importance of the money supply in explaining economic fluctuations. In the 1950s, Gurley and Shaw introduced a more comprehensive view of financial structure, emphasizing the role of financial intermediation in credit supply. Their work highlighted the importance of financial capacity and the role of intermediaries in facilitating credit flows. However, the 1970s saw a shift back towards money as the central financial aggregate, driven by methodological changes in macroeconomics and the use of vector autoregressions. Recent developments have rekindled interest in the financial system's role in economic activity, with new empirical work and theoretical advances providing insights into how informational asymmetries and credit market imperfections affect economic outcomes. The paper discusses how these factors can lead to inefficiencies in financial markets, affecting investment and consumption decisions. It also highlights the importance of financial intermediation in mitigating these inefficiencies and the need for further research to understand the full scope of financial system impacts on macroeconomic activity. Overall, the article underscores the complex and evolving relationship between financial structure and aggregate economic activity.This article by Mark Gertler provides an overview of the relationship between financial structure and aggregate economic activity. It surveys both traditional and new research, highlighting the evolving understanding of how financial markets influence macroeconomic outcomes. The paper begins by noting that traditional macroeconomic theory often abstracts from financial considerations, assuming the financial system functions smoothly. However, recent developments have led to a renewed interest in the role of financial factors in economic behavior. The article traces the historical development of this field, starting with the Great Depression, where financial system failures were seen as a key factor in economic downturns. Fisher and Keynes both emphasized the importance of financial considerations in economic activity, though Keynes focused more on liquidity and money, while Fisher highlighted the role of debt and deflation. The monetarist revolution, led by Friedman and Schwartz, further emphasized the importance of the money supply in explaining economic fluctuations. In the 1950s, Gurley and Shaw introduced a more comprehensive view of financial structure, emphasizing the role of financial intermediation in credit supply. Their work highlighted the importance of financial capacity and the role of intermediaries in facilitating credit flows. However, the 1970s saw a shift back towards money as the central financial aggregate, driven by methodological changes in macroeconomics and the use of vector autoregressions. Recent developments have rekindled interest in the financial system's role in economic activity, with new empirical work and theoretical advances providing insights into how informational asymmetries and credit market imperfections affect economic outcomes. The paper discusses how these factors can lead to inefficiencies in financial markets, affecting investment and consumption decisions. It also highlights the importance of financial intermediation in mitigating these inefficiencies and the need for further research to understand the full scope of financial system impacts on macroeconomic activity. Overall, the article underscores the complex and evolving relationship between financial structure and aggregate economic activity.