Monetary Policy Transmission in a Macroeconomic Agent-Based Model

In this paper we explore the variety of monetary policy transmission channels in an agent-based macroeconomic model. We identify eight transmission channels and present a model based on [Caiani et al., J. Econ. Dyn. Contr. 69 (2016) 375–480], extended with an interbank market. We then analyze model simulation results of interest rate shocks in terms of GDP and inflation for four of the transmission channels. We find these effects to be small, in line with the view that monetary policy is a weak tool to control inflation