Abstract
Every economy comprises of different sectors with divergent characteristics. These different sectors respond heterogeneously to identical unanticipated macroeconomic stimuli. Using a Vector Autoregression model this study finds that the impact of a monetary policy shock at the sectoral level is heterogeneous with manufacturing being the most responsive. The sectors such as Manufacturing, Mining and Quarrying, Construction and Trade are the fastest to respond. The differential sectoral effects depend upon factors such as capital intensity, interest sensitivity, export-orientation, production planning strategies among others. The sectors also differ in terms of the most effective channel of monetary transmission. The interest rate channel has emerged as the most efficient channel of the monetary policy transmission in most of the sectors followed by the credit channel. Therefore, the heterogeneous sectoral responses indicate the need for a more sector-specific monetary policy.
Get full access to this article
View all access options for this article.