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Revisiting the Monetary Transmission Mechanism Through an Industry-Level Differential Approach

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  • Sangyup Choi
  • Tim Willems
  • Seung Yong Yoo

Abstract

We combine industry-level data on output and prices with monetary policy shock estimates for 105 countries to analyze how the effects of monetary policy vary with industry characteristics. Next to being interesting in their own right, our findings are informative on the importance of various transmission mechanisms (as they are thought to vary systematically with the included characteristics). Results suggest that monetary contractions reduce output by more in industries featuring assets that are more difficult to collateralize, consistent with the credit channel, followed by industries producing durables, as predicted by the interest rate channel. The credit channel is stronger during bad times as well as in countries with lower levels of financial development, in line with financial accelerator logic. We do not find support for the cost channel of monetary policy, nor for a channel running via exports. Our database (containing estimated monetary policy shocks for over 170 countries) may be of independent interest to researchers.

Suggested Citation

  • Sangyup Choi & Tim Willems & Seung Yong Yoo, 2022. "Revisiting the Monetary Transmission Mechanism Through an Industry-Level Differential Approach," IMF Working Papers 2022/017, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/017
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    Cited by:

    1. Mr. Pragyan Deb & Julia Estefania-Flores & Melih Firat & Davide Furceri & Siddharth Kothari, 2023. "Monetary Policy Transmission Heterogeneity: Cross-Country Evidence," IMF Working Papers 2023/204, International Monetary Fund.
    2. Djeneba Dramé & Florian Léon, 2025. "Do firms react to monetary policy in developing countries? [European Economic Review]," Post-Print hal-05172185, HAL.
    3. Volha Audzei & Jan Bruha & Ivan Sutoris, 2025. "Does Firms' Financing in Foreign Currency Matter for Monetary Policy?," Working Papers 2025/10, Czech National Bank, Research and Statistics Department.
    4. Fabiani, Josefina & Neanidis, Kyriakos C., 2025. "The bank-lending channel of macroprudential policy: Evidence from cross-border bank flows," Journal of International Economics, Elsevier, vol. 157(C).
    5. Dramé, Djeneba & Léon, Florian, 2025. "Do firms react to monetary policy in developing countries?," European Economic Review, Elsevier, vol. 178(C).
    6. Ha, Jongrim & Kim, Dohan & Kose, M. Ayhan & Prasad, Eswar S., 2025. "Resolving puzzles of monetary policy transmission in emerging markets," European Economic Review, Elsevier, vol. 173(C).
    7. Byoung Jo Chun, 2024. "Identifying Interest Rate Transmission Mechanism under a Bayesian Network," Sustainability, MDPI, vol. 16(14), pages 1-15, July.
    8. Sangyup Choi & Kimoon Jeong & Jiseob Kim, 2025. "One Size Does Not Fit All: Unveiling Asymmetric Transmission of Monetary Policy in the Euro Area," Working papers 2025rwp-256, Yonsei University, Yonsei Economics Research Institute.
    9. Majeed, Omer & Hambur, Jonathan & Breunig, Robert, 2025. "Does monetary policy impact innovation? Evidence from Australian Administrative Data," Journal of Macroeconomics, Elsevier, vol. 86(C).
    10. Pozo, Jorge & Rojas, Youel, 2025. "Nonlinear impact of the conventional monetary policy: A cross-country evidence," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 6(2).
    11. Fetzer, Thiemo & Palmou, Christina & Schneebacher, Jakob, 2024. "How do firms cope with economic shocks in real time?," The Warwick Economics Research Paper Series (TWERPS) 1517, University of Warwick, Department of Economics.
    12. Itamar Caspi & Nadav Eshel & Nimrod Segev, 2024. "The Mortgage Cash-Flow Channel: How Rising Interest Rates Impact Household Consumption," Papers 2410.02445, arXiv.org.
    13. Nair, Aswathi R & Trivedi, Pushpa L & Padhi, Puja, 2025. "Financial development and inflation targeting: How market structure shapes monetary policy effectiveness," Economic Modelling, Elsevier, vol. 153(C).
    14. Bricongne, Jean-Charles & Marolleau, Louis, 2025. "The impact of monetary surprises on exchange rates: Results from textual and high-frequency analysis," Journal of International Money and Finance, Elsevier, vol. 158(C).
    15. Sangyup Choi & Kimoon Jeong & Jiseob Kim, 2024. "Asymmetric Mortgage Channel of Monetary Policy: Refinancing as a Call Option," Working papers 2024rwp-228, Yonsei University, Yonsei Economics Research Institute.
    16. Hack, Lukas & Istrefi, Klodiana & Meier, Matthias, 2024. "The Systematic Origins of Monetary Policy Shocks," CEPR Discussion Papers 19063, C.E.P.R. Discussion Papers.
    17. Abakah, Emmanuel Joel Aikins & Tiwari, Aviral Kumar & Abdullah, Mohammad & Ji, Qiang & Sulong, Zunaidah, 2024. "Monetary policy uncertainty and ESG performance across energy firms," Energy Economics, Elsevier, vol. 136(C).
    18. Jean-Charles Bricongne & Louis Marolleau, 2026. "The impact of monetary surprises on exchange rates: results from textual and high-frequency analysis," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Data science in central banking, volume 67, Bank for International Settlements.
    19. Garg, Bhavesh & Shah, Sayar Ahmad & Edirisinghe, Janaka, 2025. "Revisiting monetary policy transmission in a new inflation targeting country," Journal of Asian Economics, Elsevier, vol. 100(C).
    20. Ryan Niladri Banerjee & Denis Gorea & Deniz Igan & Gabor Pinter, 2024. "Monetary policy and housing markets: insights using a novel measure of housing supply elasticity," BIS Quarterly Review, Bank for International Settlements, December.
    21. Arin, K. Peren & Kaplan, Samuel & Polyzos, Efstathios & Spagnolo, Nicola, 2025. "Stock market responses to monetary policy shocks: Firm-level evidence," Journal of Macroeconomics, Elsevier, vol. 83(C).
    22. Guérin, Pierre, 2023. "What are the effects of monetary policy on productivity?," Economics Letters, Elsevier, vol. 233(C).
    23. Edilean Kleber da Silva Bejarano Aragon & Gabriela Bezerra de Medeiros & Igor Mendes & Ludyson Abreu, 2026. "Measuring monetary policy shocks and their effects in an emerging economy: the case of Brazil," Empirical Economics, Springer, vol. 70(3), pages 1-27, March.

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    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
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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