The function of monetary policy ranges from policy means to operational goal, to effect goal, and finally to the way and transmission process of the ultimate goal.
Monetary policy is divided into two processes: formulation and implementation. The formulation process starts with determining the final goal, and then determines the effect goal, operational goal and policy means in turn. The implementation process is just the opposite. First, starting with the operation of policy means, it directly affects the operational objectives, and then affects the effect objectives, and finally realizes the ultimate goal of monetary policy.
In western economics, the transmission mechanism of monetary policy can be divided into four ways, namely, interest rate transmission mechanism, credit transmission mechanism, asset price transmission mechanism and exchange rate transmission mechanism.