Monetary Policy and Local Industry Structure

Alexander A. Popov and Lea Steininger

No 333, Department of Economics Working Paper Series from WU Vienna University of Economics and Business

Abstract: We study how monetary policy affects local market competition in a union of countries experiencing different economic conditions: the euro area. We find that when monetary conditions tighten (loosen), from the point of view of an individual economy, market concentration increases (declines). This effect is more pronounced when interest rates have been low-for-long, and it is stronger in sectors that are relatively more sensitive to changes in financing conditions. The underlying mechanism is a decline (increase) in short-term debt and investment by smaller and medium-size firms, relative to large firms, following monetary policy tightening (easing).

Keywords: Eurozone; Monetary Union; Monetary Policy; Low Interest Rates; Competition (search for similar items in EconPapers)
Date: 2023-02
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Working Paper: Monetary policy and local industry structure (2023)
Working Paper: Monetary Policy and Local Industry Structure (2023)
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