Question

Mishkins analysis of monetary policy

Answer 1

Mishkins analysis of monetary policy states that although monetary policy is a powerful tool, however it sometimes has unwanted or unexpected consequences. For conducting a successful monetary policy, the monetary authorities should have an accurate assessment of the timing and effect of their policies on the economy, therefore needs a detailed understanding of the mechanisms through which monetary policy impacts the country's economy. Such transmission mechanisms include exchange rate effects, interest rate effects, other asset price effects and the so-called credit channel.