This paper presents new evidence on the monetary transmission mechanism based on the effects of unexpected monetary policy shocks on 21 manufacturing industries in 5 OECD countries (France, Germany, Italy, the UK and the US). The goal is twofold. First, to document the cross-industry heterogeneity of monetary policy effects. Second, to explain this heterogeneity in terms of microeconomic characteristics suggested by theory, using an original firm-level database. The results highlight the following empirical regularities: (i) a significant cross-industry heterogeneity of policy effects (ii) a similar cross-industry distribution of policy effects across countries. These patterns are systematically related to industry output durability and investment intensity and to measures of firms’ borrowing capacity, size and interest payment burden. Quantitatively, the “credit channel” variables are as significant as the traditional variables (durability, investment intensity) in explaining the differential impact of monetary policy.
Published in 2005 in: European Economic Review, v. 49, 6, pp. 1543-1569
