Asymmetric monetary policy transmission across euro-area manufacturing industries

Marco Flaccadoro () and Tiziano Ropele ()
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Marco Flaccadoro: Bank of Italy
Tiziano Ropele: Bank of Italy

No 1535, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study the asymmetric transmission of monetary policy shocks on euro-area manufacturing output and producer prices using monthly data from 2003 to 2024. Employing externally identified monetary policy shocks and nonlinear local projections, we show that contractionary policy actions generate large and persistent declines in output and prices, while expansionary shocks have weaker effects. These asymmetries are common across manufacturing industries and quantitatively important, with the contribution of monetary policy to forecast error variance driven primarily by contractionary shocks. We further show that the effects of monetary tightening are amplified in industries with greater financial fragility and stronger exposure to interest-sensitive demand.

Keywords: industrial production; inflation; business fluctuations; monetary policy (search for similar items in EconPapers)
JEL-codes: E23 E31 E32 E52 (search for similar items in EconPapers)
Date: 2026-06
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