Which channels have been effective at transmitting the expansionary monetary policy in the euro zone and the United States?
The possible monetary policy transmission channels are well known (we focus on the case of an expansionary policy): The bank credit channel (a fall in interest rates increases demand for credit, but it may reduce credit supply); The wealth channel (a fall in interest rates increases wealth, which stimulates demand for goods and services); The risk channel (an expansionary monetary policy drives down risk-free interest rates, leading savers to switch into risky assets and driving down risk premia, which is positive for investment); The exchange rate channel (a fall in interest rates leads to an exchange rate depreciation); The channel of interest payments on debt (a fall in interest rates drives down interest payments, which stimulates spending by borrowing economic agents, including the government); The expectations channel (an expansionary monetary policy can lift expectations of future growth and inflation); The channel of banks’ balance sheets and financial situation (a fall in interest rates reduces intermediation margins on credit, but increases the value of banks’ bond portfolios and reduces the risk of borrower bankruptcy). The question is which of these monetary policy transmission channels have been effective in the euro zone and the United States since the start of the 2010s. Which of them have been present or effective?