COTD: The Monetary Transmission Mechanism

On  FOMC eve we thought you’d find the following chart from the IMF’s Global Financial Stability Report useful.

The traditional discussion of monetary policy transmission emphasizes how changes in interest rates affect investment and consumption decisions.  These channels operate through changes in the user cost of capital, intertemporal substitution effects, and wealth effects.  Similarly, changes in interest rates can induce exchange rate changes and therefore influence net exports.  Although important, these channels for the transmission of monetary policy do not assign a particular role to financial intermediaries and, to a large extent, do not affect banks and nonbanks differently.
IMF_Monetary Transmission
(COTD = Chart of the Day)
Advertisements
This entry was posted in Monetary Policy, Uncategorized and tagged , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s