New Transmission Mechanism for Monetary Policy

Monetary policy transmission mechanism refers to the process where monetary policies are realized with monetary policy tools. Research on the transmission mechanism focuses on interest rate channel, asset price channel, credit channel, etc. However, these channels do not represent the whole monetary policy transmission mechanism but form one of the many parts of the mechanism — how activities in the financial market (including interest rate, exchange rate, stock price, credit, etc.) impact the real economy. Nevertheless, researches on how central bank's monetary policies transmit into the financial market are scarce.