During the Global Financial Crisis, the domestic transmission mechanism of monetary policy failed.

Question

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During the Global Financial Crisis, the traditional channels of monetary policy transmission such as changes in interest rates were not effective in stimulating borrowing and spending. This was due to a range of factors including the high level of financial distress, lack of confidence in financial markets, and a scarcity of creditworthy borrowers. As a result, central banks turned to unconventional policy tools such as quantitative easing and forward guidance to support the economy.

During the Global Financial Crisis, the Domestic Transmission Mechanism of Monetary