Monetary Policy Impulses, Local Output and the Transmission Mechanism

This paper evaluates the effects of unanticipated monetary policy shocks on Italian output on the basis of highly disaggregated data and a VAR methodology. The impact of unexpected changes in the money market interest rate on the pattern of industrial production – based on qualitative business opinion survey data – has been computed for 164 local industries. The perceived output effects of monetary impulses go up for local industries with higher investment expenditures and less liquid firms. The hypothesis that small firms bear a disproportionate burden of monetary policy does not find support in this sample.