Abstract
This research investigates the impact of monetary policy shocks on essential economic indicators, highlighting the function of various monetary policy regimes, such as IT, ER, and MT. By employing a robust methodological framework, panel Three-Stage Least Squares (3SLS) analysis, the study examines how these regimes influence the transmission mechanisms of monetary policy shocks over various channels, including interest rates, credit, and ERs. The findings indicate that the relationships between monetary policy, inflation, and economic growth are intricate and can yield unexpected outcomes, emphasising the need for a nuanced understanding of how different regimes interact with broader economic conditions. The monetary policy transmission through the interest rate channel reduces consumption and lowers inflation in the MT regime, while in the IT regime, increased lending rates unexpectedly boost consumption, leading to lower inflation that can be attributed to consumer confidence in the central bank's commitment. Monetary policy tightening raises lending rates across all regimes, leading to reduced investment; however, it unexpectedly increases GDP in the MT and ER regime, likely due to improved operational efficiencies and external demand for exports. In contrast, the IT regime shows no significant impact on GDP. Policymakers should adopt flexible monetary policy frameworks that can be adjusted based on prevailing economic conditions.