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The Monetary Transmission Mechanism: Evidence from the Industries of Five OECD Countries

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Author Info
Dedola, Luca
Lippi, Francesco

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Abstract

This paper presents new evidence on the monetary transmission mechanism based on the effects that unexpected monetary policy shocks exert on the activity of 21 manufacturing industries in 5 OECD countries (France, Germany, Italy, UK and USA). The goal is twofold. First, documenting the cross-industry heterogeneity of monetary policy effects. Second, explaining this heterogeneity in terms of some microeconomic characteristics which are 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 cross-industry distribution of policy effects similar across countries. These patterns are systematically related to the industry output durability and investment-intensity and to measures of firms' borrowing capacity, size, and interest payment burden. The ‘credit channel’ variables are quantitatively as significant as the traditional ones (durability, investment intensity) in explaining the differential impact of monetary policy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2508.

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Date of creation: Jul 2000
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Handle: RePEc:cpr:ceprdp:2508

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Related research
Keywords: Balance Sheet Data; Credit Channel; Interest Rate Channel; Monetary Policy Transmission;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

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