1  2  http://www.federalreserve.gov/newsevents/speech/bernanke2006.02.24a.htm#f3#mainNav  BIS Review 163/2008  can potentially change economic effects of the monetary policy measures, there is a need to regularly update, empirically test and reinterpret monetary policy transmission channels. The impact of monetary policy is perceived to transmit in to the real economic activity through five channels.
•  The first channel and most widely studied and understood channel of monetary policy transmission relies on the link between changes in the short-term nominal interest rate (induced by changes in the policy rate) and the long-term real interest rate that ultimately affect components of aggregate demand such as consumption and investment in an economy.