The transmission mechanism of monetary policy: Microeconomic aspects of macroeconomic issues. Issue 3 (3rd July 2017)

• Record Type: Journal Article
• Authors: Martins, Norberto Montani; Pires-Alves, Camila Cabral; Modenesi, André de Melo; Leite, Karla Vanessa Batista da Silva
• Is Part Of: Journal of post Keynesian economics. Volume 40:Issue 3(2017)
• Page Start: 300
• Page End: 326
• Publication Date: 2017-07-03
• Subjects: Heterodox microeconomic theory -- inflation -- monetary policy -- pricing -- transmission mechanism of monetary policy; D40 -- D43 -- E31 -- E43 -- E52 -- L40; 330.15
• DOI: 10.1080/01603477.2017.1319249
• Languages: English
• ISSNs: 0160-3477

Abstract

ABSTRACT: The article analyzes the transmission mechanism of monetary policy in light of microeconomic theory. We address the influence of microeconomic factors on the transmission of monetary policy while taking into account the contributions of conventional price formation and competition theory and heterodox microeconomic theories, including work inspired by the post Keynesians. We found a multiplicity of results regarding changes in price levels and inflation derived from shifts in demand and costs. These results challenge the conventional view, which postulates a single behavior in the circuit from changes in interest rates to demand, prices, and inflation. We conclude that microeconomic and macroeconomic aspects should be integrated to properly explain monetary policy and analyze its effects and transmission mechanism.