The transmission mechanism of monetary policy can vary depending on economic conditions from "summary" of A Monetary History of the United States, 1867-1960 by Milton Friedman,Anna Jacobson Schwartz
The process through which monetary policy impacts the economy can change based on the prevailing economic circumstances. This variability in the transmission mechanism is a key feature that policymakers must consider when implementing monetary policy. In times of economic stability, the transmission mechanism typically operates smoothly, with changes in monetary policy directly influencing interest rates, investment, consumption, and ultimately aggregate demand. However, during periods of economic turmoil or uncertainty, the transmission mechanism may not function as expected. Factors such as liquidity constraints, credit market disruptions, or a lack of investor confidence can impede the effectiveness of monetary policy actions. In such instances, central banks may need to employ alternative tools or unconventional measures to ensure that their policy decisions have the desired impact on the economy. For example, in the afterm...
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