Question

In light of the new changes in the monetary policy (QE, Portfolio Balance Channel, Signaling Channel, …), the Neoclassical Channels such as investment-based Channels is invalid. Agree or disagree!

Answer 1

Disagree.Economists do not agree about how monetary policy affects the economy. Different observers weigh in different ways the various specific channels through which monetary policy works. Views diverge even about the monetary transmission process in individual industrialised nations, the subject of decades of theoretical and empirical research; the process in developing countries is still more uncertain

Because changes in the structure of the economy – including changes in balancesheet positions, in financial sector technology and institutions, or in expectations concerning future policy – tend to alter the economic effects of a given monetary policy measure, central banks need to be alert to the impact of structural change. They need to be able to continuously reinterpret the channels of transmission of monetary policy.