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All over the world, the role of central banks is being redefined following the outbreak of the global financial crisis and subsequent breakdown of the “great moderation” consensus. Consequently, most advanced economies adopted non-conventional approaches of monetary policy which resulted in spill-overs to emerging markets and developing countries with implications on their financial system and monetary policy transmission. This, coupled with, internal developments in the financial systems of developing countries necessitated modifications of not only monetary policy frameworks but also responsibilities of most central banks. This chapter acknowledges possible evolutions of the financial structure variables in developing countries and uses data from Kenya to analyze the dynamic linkages between financial sector variables and monetary policy transmission in the light of the financial crisis. The study used structural vector autoregression to examine the relationship between financial structure variables and monetary policy as well as assess the relative importance of various monetary transmission channels in Kenya. The results show that the changing financial structure represented by credit to the private sector and stock market indicators in Kenya only slightly altered relative importance of monetary policy transmission. The insignificance of credit to the private sector suggests that the importance attached to the bank lending channel in previous studies is waning while the marginal significance of the stock market indicator signals the potential for asset price channel. The results also indicate that the interest rate and exchange rate channels are relatively more important in Kenya while the asset prices is only marginally significant and bank lending channel is the weakest in the intermediate stage of monetary policy transmission. However, transmission of monetary policy to the ultimate objectives is somewhat slow and weak to inflation and almost absent to output. The result implies a limited role of monetary policy on growth and questions the wisdom of pursuing multiple objectives.

Introduction: Monetary policy resolutions issued by central banks play effective role in economy when accompanied with interest variable. In Keynesian approach to finance, interest is treated as the main determinant underlying financial policy resolutions. Thus interest is a pivotal factor in monetary transmission mechanism. Tight monetary policy practices, essentially decreasing money supply, eventually lead to a slump in investments, total demand and national income due to the increase in real interest rates.

Objective: The aim of this study is to determine what type of effects do monetary policy practitioner in Turkey have on macroeconomic variables via the interest channel of monetary transmission mechanism.

Methodology: Based on this objective, variables that could help in unveiling CBT overnight interest rates, direct fixed capital investment (GSSO), real gross domestic product (RGDP), industry production index (SUE) and domestic producer price index (YUFE) variables and that could explain monetary functions of transmission mechanism’s interest channel were selected. For the variables constituting the research topic, collected data belong the period of 2003Q1–2018Q3.

Findings: In the study relation between the variables has been analyzed under two parts via harnessing Toda–Yamamoto casualty test. In the first part, results of Toda–Yamamoto causality test from RGDP, GSSO and interest rate (FO) variables have been presented. The results manifest that interest channel directly affects direct fixed capital investment and RGDP. Interest channel was found to be effective on these variables of the analysis. In the second part, Toda–Yamamoto causality test was harnessed for SUE, YUFE and FO variables. Interest channel did not provide a result that affected YUFE and SUE.

This chapter examines the influence of external public borrowing resources on economic progress in Tunisia. The study focuses on two stages: First, the influence is studied in a direct sense and then in an indirect sense, i.e., through a transmission channel of this influence. By applying the autoregressive distributed technique with staggered lags (ARDL), over a period ranging from 1986 to 2019, the results showed that the influence of external borrowing resources on growth seems to be unfavorable in the short term but positive in the long term, hence the importance of the empirical technique chosen. Second, three interaction variables were tested, namely total government expenditure, government investment expenditure, and the real effective exchange rate. The results obtained call for better attention to the channels identified to maximize the positive influence of external public debt on the country's economic progress.

Adults raised in poor households tend to be more prone to live in poverty than the rest, ceteris paribus. This holds true even in the presence of observed income transmission channels such as education attainment. We identify this differential poverty risk as intergenerational transmission of economic disadvantage (ITED). This chapter contributes to the literature on cross-country differences in the intensity of ITED in the EU by explicitly testing how macro-economic/institutional features shape the phenomenon. Working on a sample of 30- to 39-year-old interviewees from the EU-SILC 2011 module on Intergenerational transmission of disadvantages, the authors find that, first, past income inequality is positively correlated with current ITED intensity; second, past efforts on inequality reduction via social protection for families with children and unemployment benefits are negatively correlated with later ITED levels; finally, educational expansion correlates with lower ITED, pointing to the relevance of public investments in education as a way to fight inequality of opportunity.

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

This chapter examines the effects of financial deepening on the sources of economic growth in Russia. Previous empirical literature based on cross-country studies presented the evidence that in developing countries financial development affects capital accumulation more than productivity growth. We tested this proposition with panel data from 75 regions of Russia’s regions between 2008 and 2015 using system generalized method of moments techniques. Our results are not consistent with this proposition: the effect of finance on output growth occurs primarily through productivity; the positive influence of finance on capital accumulation is less significant, which is more typical for developed countries. This outcome can be explained by the fact that structural problems in Russia and developed countries are somewhat similar. More helpful for Russian economy are tools that would help business get a more profound effect from efforts to promote innovation and boost productivity than from increasing investment by expanding credit.

The monetary policy implementation and corporate investment are closely intertwined. The aim of modern monetary policy is to mitigate economic fluctuations and stabilise economic growth. One of the ways of influencing the real economy is influencing the level of investment by enterprises.

This chapter provides evidence on how monetary policy affected corporate investment in Poland between 1Q 2000 and 3Q 2022. We investigate the impact of Polish monetary policy on investment outlays in contexts of high uncertainty.

Using the correlation analysis and the regression model, we show the relation between the monetary policy and the investment outlays of Polish enterprises. We used the least squares method as the most popular in linear model estimation. The evaluation includes model fit, independent variable significance and random component, i.e. constancy of variance, autocorrelation, alignment with normal distribution, along with Fisher–Snedecor test and Breusch–Pagan test.

We find that Polish enterprises are responsive to changes in monetary policy. Hence, the corporate investment level is correlated with the effects of monetary policy (especially with the decision on the central bank's basic interest rate changes). We found evidence that QE policy has a positive impact on Polish investment outlays. The corporate investment in Poland is positively affected by respective monetary policies through Narodowy Bank Polski (NBP) reference rate, inflation, corporate loans, weighted average interest rate on corporate loans.

We find evidence that the runs on banks and trust companies in the Panic of 1907 were linked to the Bank of England’s contractionary monetary policy actions taken in 1906 and 1907 through the medium of copper prices. Results from our vector autoregressive models and copper stockpile data support our argument that a copper commodity price channel may have been active in transmitting the Bank’s policy to the New York markets. Archival evidence suggests that the plunge in copper prices may have partially triggered both the initiation and the failure of an attempt to corner the shares of United Copper, and in turn, the bank and trust company runs related to that transaction’s failure. We suggest that the substantial short-term uncertainties accompanying the development of the copper-intensive electrical and telecommunications industries likely played a role in the plunge in copper prices. Additionally, we find evidence that the copper price transmission mechanism was also likely active in five other countries that year. While we do not argue that copper caused the 1907 crisis, we suggest that it was an active policy transmission channel amplifying the classic effect that was already spreading through the money market channel. If the bust in copper prices partially triggered the 1907 panic, then it provides additional evidence that contractionary monetary policy may have had an unintended, adverse consequence of contributing to a bank panic and, therefore, supports other recent findings that monetary policy deliberations might benefit from considering the policy impact on asset prices.

The chapter contains a methodology for formalized evaluation of the role of the Central Bank of the Russian Federation (Bank of Russia) in ensuring monetary and financial sustainability with the help of the monetary policy transmission mechanism and its inflation target regime. The significance of the research of the Bank of Russia operations to ensure financial sustainability is due to a number of circumstances: the uniqueness of the Bank of Russia that appeared only 27 years ago and experienced several devastating events related to the 1998 financial crisis, the global financial crisis of 2008–2009, and the stagnation of the Russian economy in 2014–2016, as well as high volatility of world prices for Russian commodity exports and the latest contra-Russian sanctions that significantly affected the volatility of the Russian ruble. Taking into account all the above, the issue of the Bank of Russia’s effective activities in the long run is aggravated by the fact that there are still more open questions than proven relationships of causes and effects regarding the potential of specific monetary policy instruments in the context of low-growth and high-volatility environment. The modeling of the Bank of Russia strategic and operational targets has been based on the parameters’ dependencies presented by the money (credit) multiplier in the interpretation of G. Schinasi (2006) and on the instability of stable economy hypothesis of H. Minsky (2008). As a result, there have been established the marginal levels of definite indicators of the banking system performance that could allow the Bank of Russia to ensure financial sustainability in the low-growth and high-volatility environment.