Sectoral Heterogeneity in the International Transmission of Monetary Policy

Ozan Eksi, K. Peren Arin, Neslihan Kaya Eksi and Moo-Sung Kim

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper investigates the international transmission of Federal Reserve monetary policy shocks to European firms across four firm-level outcomes: investment, sales growth, profit margins, and debt growth. Using high-frequency identification of Fed shocks combined with local projections on firm-level panel data from five Eurozone countries over 2004-2024, we find that Fed tightening reduces investment and sales, leaves profit margins largely unchanged, and increases debt accumulation. These effects are broadly observed across sectors, with Wholesale Retail Trade and Manufacturing somewhat more affected, while Agriculture, Forestry, Fishing, and Services (Health and Education) remain largely irresponsive across all outcomes. The Finance, Insurance, and Real Estate sector is a notable exception, exhibiting a positive investment response to Fed tightening. All results are robust to controlling for concurrent ECB policy shocks, highlighting the independent global reach of U.S. monetary policy through international credit and dollar funding channels.

Keywords: monetary policy transmission; sectoral heterogeneity; high-frequency identification; local projections (search for similar items in EconPapers)
JEL-codes: C32 E52 E58 F42 G31 L16 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2026-05
New Economics Papers: this item is included in nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2026-32

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