Study On The Issue Of Monetary Policy Transmission Mechanism Of European Central Bank

Monetary policy has great effect on economy. Understand the transmission channel of monetary policy is not only the focus of macroeconomic research, but also the key to economic policy analysis. Since the 1990s, with the peace of globalization, international capital flow become more frequency, interest rate and exchange rate is more sensitive to the expectation of monetary policy, financial institution integration trend become notable and the operation of monetary policy is more difficult. Under these backgrounds, monetary authorities of each country make adjustments to the goals, instruments and rules of the monetary policy, and monetary policy transmission mechanism is also experiencing changes.The so-called monetary policy transmission mechanism means in order to realize the transmission procedure of monetary policy goals, certain monetary policy instruments affect the socio-economic activities through some economic variables within the economic system. This paper detailed the connotation of monetary policy transmission mechanism by discussing monetary policy instruments, operating targets, intermediate targets and final goals of monetary policy, main body and the carrier of monetary policy.The results of this paper prove that zero inflation could lead to first-best but inconsistent with time, and the inflation which consistent with time just lead to second-best. This result means there exists reliable monetary policy that is better than discretionary approaches. Therefore monetary authorities...