Industrial activity, especially, has been disappointing, particularly among automotive manufacturers. German economic output even contracted in the third quarter of 2018 – primarily due to the difficulties which car makers encountered in connection with the new vehicle emissions test procedures. The Bundesbank’s economic experts assumed in their December forecast that the car industry would quickly get to grips with these issues.
However, financial markets refused to respond and remained in seizure reflecting the near total collapse of monetary transmission. 29. The effectiveness of monetary transmission, the process by which the central bank’s policy signals influence the financial markets, is a function of both tangible and intangible factors. It depends on the depth and efficiency of the financial markets.