September 2019 issue contents
What Drives the Strength of Monetary Policy Transmission?

This paper analyzes the cross-country and time variation in monetary policy transmission from short-term interest rates to price level. Using Bayesian TVP-VAR models where the structural monetary policy shocks are identified using zero and sign restrictions, the results suggest that monetary policy transmission has become stronger over time and sacrifice ratios have decreased. Exploring the cross-country and time variation in monetary policy responses using panel regressions, I show that stronger monetary policy transmission and lower sacrifice ratios were associated with an inflation-targeting regime. In periods of banking crises, the transmission was weaker and output costs were higher.