Central banks typically control an overnight interest rate as their policy tool, and the transmission of monetary policy happens through the relationship of this overnight rate to the rest of the yield curve. The expectations hypothesis, that longer-term rates should equal expected future...

We discuss the evolution in macroeconomic thought on the monetary policy transmission mechanism and present related empirical evidence. The core channels of policy transmission - the neoclassical links between short-term policy interest rates, other asset prices such as long-term interest rates,...

The Japanese zero-interest rate period provides a "natural experiment" for investigating the effectiveness and transmission channels of sterilized intervention when traditional monetary policy options are constrained. This paper takes advantage of the fact that all interventions in the JPY/USD...

Production sharing and vertical specialization account for a significant share of trade between developed and developing countries. The Mexican maquiladora industry provides an ideal example of production sharing in a small open economy. The typical "maquila" imports most of its inputs from and...

We study the relationship between banking competition and the transmission of monetary policy through the bank lending channel. Using business small loan origination data provided from the Community Reinvestment Act from 1996-2002 in our analysis, we are able to reaffirm the existence of the...

In principle, the monetary policy transmission mechanism can be described rather simply. When the Federal Reserve raises its target for the federal funds rate, other interest rates also rise—reducing interest-sensitive spending and slowing the economy. Conversely, when the federal funds rate...

We revisit recent evidence on how monetary policy affects output and prices in the U.S. and in the euro area. The response patterns to a shift in monetary policy are similar in most respects, but differ noticeably as to the composition of output changes. In the euro area investment is the...