The authors provide evidence on the nature of the monetary transmission mechanism. To identify policy shocks in a setting with both economic and financial variables, they combine traditional monetary vector autoregression (VAR) analysis with high frequency identification (HFI) of monetary policy shocks. They first show that the shocks identified using HFI surprises as external instruments produce responses in output and inflation consistent with both textbook theory and conventional monetary VAR analysis. They also find, however, that monetary policy surprises typically produce "modest movements" in short rates that lead to "large" movements in credit costs and economic activity. The large movements in credit costs are mainly due to the reaction of both term premia and credit spreads that are typically absent from the standard model of monetary policy transmission. Finally, they show that forward guidance is important to the overall strength of the transmission mechanism.