How many monetary transmission mechanisms are there?
by Nick Rowe
The ever-resourceful Nick invites us to think about monetary transmission mechanisms, and he suggests that there may be many.
You want concrete steps? I will give you a million different flights of concrete steps.
For example, like Lars Christensen, lets talk about the monetary transmission mechanism where the central bank adjusts the stock price index, rather than a short term nominal interest rate. No zero lower bound problem there.In case no one has noticed, the Fed is already fixing the stock price index through QE. Indeed, a Fed official admitted that asset prices are higher than they would be otherwise, and it is clear that this is policy objective to increase the "wealth effect." Markets have already priced in QE3 to a degree, and if it is not forthcoming, then eventually this expectation will be discounted.