Transmission mechanism of monetary policy in the beginning of the third millennium

Over the past decade, three important challenges - the introduction of new monetary-policy strategies, the observed differences in the anatomy of financial crises between developed and emerging economies, and the emergence of the EMU - gave rise to a new debate regarding the transmission mechanism of monetary policy. Emphasis has been placed on several transmission channels that had previously been neglected. The differences in the transmission mechanism of the monetary-policy conduct of various countries have been analysed, and consequently, more attention has been paid to risks when considering one country's experience versus another's. The paper presents an overview of the theoretical foundations, three main stages and channels of transmission mechanism that serve to illustrate cross-country differences. Additionally, the specific problems of the transmission mechanism of monetary policy in emerging economies are discussed in detail.