The differential impacts of monetary policy: Are the differences diminishing?

Several recent studies have highlighted the importance of variation in industry-mix across regions or states in explaining the differential impacts of monetary shocks across those areas. However, the differences between regions in terms of the percentage of total activity accounted for by manufacturing and construction have been decreasing. The logical implication is for the differential impacts of monetary shocks to diminish over time as regions become relatively more similar. This article estimates the state-level impacts of federal funds rate shocks over two sample periods to determine whether the differences in the magnitude of monetary impacts have declined. Copyright RSAI 2005.