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The Industry Effects of Monetary Policy in the Euro Area

Bibliographic Data

ID9718260
AuthorsGert Peersman (0000-0002-0480-1927, Ghent University), Frank Smets (0000-0003-2067-7505, European Central Bank, CEPR and University of Ghent)
Year2005
Volume115
Issue503
Pages319-342
Publication date2005-04-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2005.00991.x
OpenAlexW3124802807
LanguageEN
Citations received17
References cited5

We first estimate the effects of a euro area-wide monetary policy change on output growth in eleven industries of seven euro area countries over the period 1980-98. On average the negative effect of an interest rate tightening on output is significantly greater in recessions than in booms. There is, however, considerable cross-industry heterogeneity in both the overall policy effects and the degree of asymmetry across the two business cycle phases. We then explore which industry characteristics can account for this cross-industry heterogeneity. Differences in the overall policy effects can mainly be explained by the durability of the goods produced in the sector. This can be regarded as evidence for the conventional interest rate/cost-of-capital channel. In contrast, differences in the degree of asymmetry of policy effects are related to differences in financial structure, in particular the maturity structure of debt, the coverage ratio, financial leverage and firm size. This suggests that financial accelerator mechanisms can partly explain cross-industry differences in asymmetry. Copyright 2005 Royal Economic Society

Economic history · Economics · Keynesian economics · Monetary policy · Political science · Fiscal Policies and Political Economy · Global Financial Crisis and Policies · Monetary Policy and Economic Impact

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Unique citing works17
Citations per year0.77
Citation span2004 - 2025 (22)
Citation velocityrecent
Highly citedNo
Citation typesNeutral: 17

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