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Asymmetric monetary policy transmission across euro-area manufacturing industries

Author

Listed:
  • Marco Flaccadoro

    (Bank of Italy)

  • Tiziano Ropele

    (Bank of Italy)

Abstract

We study the asymmetric transmission of monetary policy shocks on euro-area manufacturing output and producer prices using monthly data from 2003 to 2024. Employing externally identified monetary policy shocks and nonlinear local projections, we show that contractionary policy actions generate large and persistent declines in output and prices, while expansionary shocks have weaker effects. These asymmetries are common across manufacturing industries and quantitatively important, with the contribution of monetary policy to forecast error variance driven primarily by contractionary shocks. We further show that the effects of monetary tightening are amplified in industries with greater financial fragility and stronger exposure to interest-sensitive demand.

Suggested Citation

  • Marco Flaccadoro & Tiziano Ropele, 2026. "Asymmetric monetary policy transmission across euro-area manufacturing industries," Temi di discussione (Economic working papers) 1535, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1535_26
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2026/2026-1535/en_tema_1535.pdf
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    More about this item

    Keywords

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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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

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