• factor-augmeted VAR
• interest-rates
• Monetary Policy
• transmission mechanisms.

Nominal and real interest rates started declining in the eighties, with the Great Financial Crisis deepening the already declining trajectory. As conventional monetary policy transmission mechanisms rely on interest-rate management, it is of utmost importance to characterize the reasons for this unusual dynamic. From a policy perspective, one may also ask whether monetary policy exerts lower effectiveness when interest rates are persistently low. \\The aim of the present work is twofold. On the one hand, it presents a thorough survey of the literature accounting for the observed declining trajectory of the last forty years. On the other, it provides fresh evidence from a FAVAR estimated on two subsamples, corroborating the provision that lower-for-long interest rates impinge upon monetary policy effectiveness. To uncover the responsible causal mechanisms, a FAVAR estimated on a single sample ascertains the operation of a risk-taking channel of monetary policy.