MONETARY POLICY TRANSMISSION MECHANISMS
MONETARY POLICY TRANSMISSION MECHANISMS

Summary/Abstract: In the short term, the evolution of prices is subject to multiple influences, generated by factors originating from the national economy and from the external environment, which act on aggregate demand and supply. In the medium and long term, however, a fundamental role in ensuring price stability belongs to the conduct of monetary policy. The monetary policy transmission mechanism represents all the channels through which the central bank, using a varied set of monetary policy instruments, can influence the dynamics of aggregate demand and prices in the economy. In general, the signals sent through monetary policy decisions produce their effects on the economy indirectly, propagating through the intermediate link represented by the financial-banking system.

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