Purpose of interest rate channel
What components of aggregate spending depend on the interest rate? The channels of influence are to a large degree independent of which country we study The interest rate channel is a mechanism of monetary policy, whereby a policy-induced change in the short-term nominal interest rate by the central bank affects the price level, and subsequently output and employment. The interest rate channel, for example, suggests that monetary policy makers use their leverage over nominal, short-term interest rates, such as the federal funds rate, to influence the cost of capital, and subsequently, purchases of durable goods and firm investment.