An important factor that determines the effectiveness of monetary policy is its transmission. 

Monetary Policy Transmission is a process through which changes in the policy achieve the objectives of controlling inflation and achieving growth.  

The transmission channels in the implementation of monetary policy are 

(a) the money supply and credit  

(b) the interest rate 

(c) the exchange rate 

(d) the asset price 

How these channels function in an economy depends on its stage of development and its underlying financial structure.  

For Example –  In an open economy, the exchange rate channel plays a crucial role. Likewise, in conditions where banks dominate financing over capital markets, the credit channel becomes a significant avenue for monetary transmission.

It’s important to note that these channels are not mutually exclusive; there is substantial feedback and interaction between them.