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

Combining industry-level data on output and prices with novel monetary policy shock estimates for 102
countries, we 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 policy has greater output effects in industries featuring assets that are more difficult to
collateralize or consisting of smaller firms, 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, and only limited support for a channel
running via exports. Our database (containing monetary policy shock estimates for 176 countries) may
be of independent interest to researchers.