FIGURE 25-3
TRANSMISSION
MECHANISMS
COMPONENTS OF
SPENDING (GDP)
CONSUMER
DURABLE
EXPENDITURE
RESIDENTIAL
HOUSING
INVESTMENT
NET EXPORTS
INVESTMENT
INVESTMENT
Lending activity
Moral hazard,
adverse
selection
Stock prices
GROSS DOMESTIC PRODUCT
CONSUMPTION
RESIDENTIAL
HOUSING
INVESTMENT
Bank loans
Financial
wealth
Tobin s q
Exchange
rate
Bank deposits
Stock prices
Stock prices
Real
interest rates
Real
interest rates
Monetary
policy
Monetary
policy
Monetary
policy
Monetary
policy
Monetary
policy
BALANCE
SHEET
CHANNEL
BANK
LENDING
CHANNEL
WEALTH
EFFECTS
Monetary
policy
TOBIN'S q
THEORY
OTHER ASSET PRICE EFFECTS
EXCHANGE
RATE
EFFECTS ON
NET EXPORTS
TRADITIONAL
INTERESTRATE
EFFECTS
MONETARY POLICY
INVESTMENT
Lending activity
Moral hazard,
adverse
selection
Cash flow
Nominal
interest rates
Monetary
policy
CASH FLOW
CHANNEL
CREDIT VIEW
INVESTMENT
Lending activity
Moral hazard,
adverse
selection
Unanticipated
price level
Monetary
policy
CONSUMER
DURABLE
EXPENDITURE
RESIDENTIAL
HOUSING
Probability
of financial
distress
Financial
wealth
Stock prices
Monetary
policy
UNANTICIPATED HOUSEHOLD
LIQUIDITY
PRICE LEVEL
EFFECTS
CHANNEL
653
The Link Between Monetary Policy and GDP: Monetary Transmission Mechanisms