No. 961 - The effects of monetary policy on gross domestic product, investment and inflation: an analysis of Italian regional heterogeneity
This paper analyzes the impact of the ECB's monetary policy on GDP, investment and inflation across Italian regions and seeks to identify and explain the heterogeneous effects in different regions. The approach is empirical and involves two stages: first, regional responses to monetary policy shocks are estimated and their heterogeneity is assessed; then, the determinants of this variability are investigated using composite indicators of local industrial and banking system characteristics.
Euro-area monetary policy has heterogeneous effects across regions. This variability is mainly explained by differences in the structure of regional industrial systems. Other relevant factors - though playing a smaller role - include firms' financial fragility and the share of small intermediaries in local banking systems.
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