THE EXCHANGE RATE CHANNEL AND ITS ROLE WITHIN THE MONETARY POLICY TRANSMISSION MECHANISM
THE EXCHANGE RATE CHANNEL AND ITS ROLE WITHIN THE MONETARY POLICY TRANSMISSION MECHANISM

Summary/Abstract: This paper addresses the subject of the monetary policy transmission by focusing on the exchange rate channel, the channel responsible for the propagation via exchange rates of the effects induced by the central bank’s monetary policy decisions. These effects target variables such as the levels of output and consumption, the unemployment rate or inflation. The purposes of the study are of achieving a deeper understanding of the processes within the exchange rate channel and providing with a general framework describing how the channel may function depending on the economic environment.

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