This thesis examines methodically the three mainstream theories that try to explain the money creation role of commercial banks in nowadays society, since their inception until today. In the intermediation model banks act merely as mediators between savers and borrowers, in a process that requires accumulation of real resources prior to lending; the credit creation theory sustains that banks create deposits every time they accept a lending opportunity, and that they can do so instantly only

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... ted by their search for profitability. The third view believes that the whole banking system acts as a collective unit, and that through a money multiplier mechanism the decisions of the Central Bank directly affect the volume of the money supply. Using pre-existing empirical exercises we reach the conclusion that a series of unanticipated shocks result in much greater effects for the real economy, in magnitude and speed, under the assumptions of the credit creation view than with the other two theories. This is in fact more in line with historical data than the outcomes from the other two alternatives. As a consequence, we believe that the incorporation of the \better" theory in current and future macroeconomic models would result in substantial forecast improvements.