The Short Lags of Monetary Policy

We examine the transmission of monetary policy shocks to the macroeconomy at high frequency. To do so, we construct daily consumption and investment aggregates from bank transaction records and leverage administrative data on daily corporate sales and employment for Spain. We show that variables typically viewed as slow-moving, such as consumption and corporate sales, respond significantly within weeks. By contrast, aggregate employment and (monthly) consumer prices adjust only gradually. Disaggregating responses by sector, consumption category and supply-chain distance from final demand, we find that fast demand adjustment is led by downstream sectors closely tied to consumption—especially luxury goods and durables—while upstream sectors respond more slowly but more persistently, ultimately accounting for the contraction in aggregate activity. Excess inventories accumulate first in retail and wholesale trade and only later among upstream manufacturers, reconciling the rapid adjustment of sales with the slower response of production and employment. Finally, we show that time aggregation to the quarterly frequency obscures the timing of monetary policy transmission by shifting estimated responses to longer horizons, whereas weekly and monthly aggregation preserve the patterns observed at daily frequency.