In general, monetary policy can be more stable and interest rates less volatile because smaller policy rate changes would be needed in order to achieve the desired effect on aggregate demand. 9  Lane and Milesi-Ferretti (2006).
10  There is a growing body of literature that supports the view that the transmission of financial market developments across the world has in recent years reached a point at which financial markets in any given country will react to economic news that is expected to change the path of monetary policy rates in the major industrialised economies.. See, for example, Ehrmann et al.