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COTD: The Monetary Transmission Mechanism

Tuesday, March 14, 2017 15:48
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(Before It's News)

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.
(COTD = Chart of the Day)



Source: https://macromon.wordpress.com/2017/03/14/cotd-the-monetary-transmission-mechanism/

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