Abstract
This paper uses an extension of CC-LM model of Bernanke and Blinder (1988) to discuss the efficacy of monetary policy when financial innovations become popularized. We employ the U.S. data to estimate CC curve. We find that the CC curve responds less to monetary expansions(contractions) when financial innovations become popularized. We also find, in contrast to previous literature e.g. Estrella(2002), the interest rate was not an important transmission channel of monetary policy.