menzie chinn up-ed :
"The first channel
what :
" A reduced nominal interest rate, in the presence of nominal price rigidities, results in a lower real interest rate. "
how:
"This changes the optimal stock of capital"
The second channel
what
"a depreciated exchange rate "
how
"induces greater exports and less imports"
The third channel
what
"the ratio of the market price versus book price of physical capital "
how
"A lower nominal (and hence real) interest rate drives up the present value of the stream of returns to a unit of capital, and hence stock prices."
the fourth channel
what
"Wealth effects"
how
"monetary policy affecting the valuation of the components of wealth"
the fifth channel
what
" the bank lending channel"
how
" as the Fed engages in open market operations, banks have an incentive to lend in order to get rid of non-interest-bearing excess reserves. "
the sixth channel
what
" balance sheet "
how
"Lower interest rates raise firm net worth thereby reducing adverse selection problem faced by banks"
the seventh channel
what
"cash flow"
how
" Lower interest rate payments increase cash flow
The eight channel
what
"household liquidity effects "
" households increase consumption because they can borrow more "
nineth channel
what
" unanticipated price channel effect "
how
"firms and households have debt denominated in nominal terms, while their assets often take the form of physical capital. "
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