The study exploits 2-digit level industry data for the period 1981-2004 to ascertain the interlinkage between a monetary policy shock and industry value added. Accordingly, we first estimate a Vector Auto Regression (VAR) model to ascertain the magnitude of a monetary policy shock on industrial output. Subsequently, we try to explain the observed heterogeneity in terms of industry characteristics. The findings indicate that (a) industries exhibit differential response to a monetary tightening and (b) both interest rate and financial accelerator variables tend to be important in explaining the differential response.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
17307.
Length: Date of creation: Jan 2009 Date of revision: Publication status: Published in Indian Economic Review 1.44(2009): pp. 89-105 Handle: RePEc:pra:mprapa:17307
Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
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