Revisiting the Monetary Transmission Mechanism Through an Industry-Level Differential Approach

Sangyup Choi, Tim Willems and Seung Yong Yoo

No 2022/017, IMF Working Papers from International Monetary Fund

Abstract: We combine industry-level data on output and prices with monetary policy shock estimates for 105 countries to analyze how the effects of monetary policy vary with industry characteristics. Next to being interesting in their own right, our findings are informative on the importance of various transmission mechanisms (as they are thought to vary systematically with the included characteristics). Results suggest that monetary contractions reduce output by more in industries featuring assets that are more difficult to collateralize, consistent with the credit channel, followed by industries producing durables, as predicted by the interest rate channel. The credit channel is stronger during bad times as well as in countries with lower levels of financial development, in line with financial accelerator logic. We do not find support for the cost channel of monetary policy, nor for a channel running via exports. Our database (containing estimated monetary policy shocks for over 170 countries) may be of independent interest to researchers.

Keywords: Monetary policy transmission; Industry growth; Financial frictions; Asymmetry in transmissions; balance sheet channel; channel of monetary policy; differential approach; IMF working papers; monetary policy stance; Financial statements; Central bank policy rate; Exchange rates; Monetary tightening; Export fluctuations; Global; credit channel; monetary policy shock; effects of monetary policy; x MPS; shock series; Credit; Financial sector development (search for similar items in EconPapers)
Pages: 67
Date: 2022-01-28
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Related works:
Journal Article: Revisiting the monetary transmission mechanism through an industry-level differential approach (2024)
Working Paper: Revisiting the monetary transmission mechanism through an industry‑level differential approach (2023)
Working Paper: Revisiting the Monetary Transmission Mechanism through an Industry-Level Differential Approach (2023)
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