<h1>Interest rate transmission reduces aggregate demand, hitting investment and imports hardest while consumption and government spending are less affected.</h1> Using a structural VAR for 2000Q1-2011Q1, the paper finds that interest rate hikes significantly reduce aggregate demand, with largest impacts on investment and imports; private consumption and exports respond less, government consumption shows negligible cumulative effect; interest rate transmission predominates over exchange rate effects, though exchange rate matters for investment and imports.