The Monetary Transmission Mechanism: is it Relevant for Policy?
We study environments with sticky prices, wages, or portfolios where it is feasible and optimal to use monetary policy to replicate the allocation under full flexibility. In these environments the optimal policy does not depend on the scope of the frictions. In this sense, the strength of the monetary transmission mechanism is irrelevant for the conduct of monetary policy. So, asymmetries in the strength of the transmission mechanisms do not impose a cost on a common policy. (JEL: E31, E41, E58, E62) Copyright (c) 2004 The European Economic Association.
(This abstract was borrowed from another version of this item.)
Volume (Year): (2005)
Issue (Month): ()
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