Research On The New Keynesian Theory Of Monetary Policy Transmission Channel

With regard to the effectiveness of monetary policy,economists have always been controversial.Classical economics and neoclassical macroeconomics insist that monetary policy is ineffective,while Keynesian economics,monetary school and New Keynesian economics think that monetary policy is effective.An important feature of New Keynesian economics is to study the monetary theory and policies and the effectiveness of monetary theory and policies by studying the monetary policy transmission.The term “monetary policy transmission channel” emerged after the 1980 s and was proposed by New Keynesian economists.It examines the channels through which monetary policy is transmitted.It is actually a further deepening of the study of monetary theory.The issue of monetary policy transmission channels mainly involves two aspects;On the one hand,theoretically speaking,economists have acknowledged that money supply affects economic activities,but exactly what channel the money supply will affect the real economy is more complicated and needs further study;On the other hand,regarding the causes of the Great Depression in the 1930 s,there are many research conclusions.For example,Monetary economists such as Friedman explained it as a result of improper use of monetary policy.However,new Keynesian economists have found through empirical research that the decline in the money supply has not led to a continuous decline in total output.In reality,The monetary policy transmission channels have a major impact on economic performance.New Keynesian economics studies on the transmission channels of monetary policy mainly include four kinds of transmission channels;interest rate,exchange rate,asset price,and credit.They believe that if the transmission mechanism variables accurately respond to monetary policy,the central bank can use the transmission mechanism variable as an intermediate target for monetary policy selection.The practice of monetary policy in several economies during the economic crisis,such as the United States and Japan,showed that the transmission mechanism variables did not respond effectively to monetary policy.It can also be seen from these cases that the direct intervention of the government on the transmission mechanism variables has played a key role in restoring the effectiveness of monetary policy.The issue of monetary policy transmission mechanism also shows that enhancing the effectiveness of monetary policy in preventing financial risks should be an important part of the effective operation of monetary policy transmission mechanism.