Journal of Economic Perspectives: Vol. 9 No. 4 (Fall 1995)


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The Monetary Transmission Mechanism: An Empirical Framework

Article Citation

Taylor, John B. 1995. "The Monetary Transmission Mechanism: An Empirical Framework." Journal of Economic Perspectives, 9(4): 11-26.

DOI: 10.1257/jep.9.4.11


This paper provides an overview of the monetary transmission mechanism describing the impact of changes in monetary policy on real GDP. Changes in financial market prices--including long-term interest rates and exchange rates--are the main vehicle for the transmission of policy. The framework incorporates rational expectations and policy rules. It is empirical and appears to fit the facts well.

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Taylor, John B. (Center for Econ Policy Research, Stanford U)

JEL Classifications

E52: Monetary Policy
E43: Determination of Interest Rates; Term Structure of Interest Rates


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