One is through the effect that interest rate changes have on the exchange rate of a currency, and the other is through the effect that interest rate changes have on demand. Therefore monetary policy has an impact on economic activity and growth through the workings of foreign and domestic markets for goods and services.
1  BIS Review 103/2000  Economic growth involves the allocation of production factors to productive use and this allocation of resources takes place in markets. In a modern economic system, markets for goods and services, and for production factors, function more efficiently because of the existence of money as a medium of exchange.