But if all central banks ease similarly at around the same time, there is no exchange rate channel: we trade with one another, not with Mars. There are, of course other transmission mechanisms, but once we cancel out the exchange rate channel, the overall effect for any one economy is reduced.
If firms don’t want to invest because of elevated uncertainty, we can’t be confident that changes in monetary conditions will have the normal effect. What we can have more confidence in, though, is that the easier monetary conditions will push up asset prices, which brings its own set of risks. So what are the other policy levers? Broadly speaking, there are three.