Monetary Policy Shocks and Sectoral Investment: Evidence and Identification Challenges in the Euro Area
DOI:
https://doi.org/10.26867/se.2026.15.2.361Keywords:
Monetary policy;, sectoral investment, external financial dependence, credit channel, panel data, sectoral heterogeneity, euro areaAbstract
This article analyses the impact of monetary policy shocks on sectoral investment in the euro area, with particular emphasis on the role of external financial dependence as a transmission channel. The empirical strategy is based on a panel data model with sector, country and time fixed effects, allowing for the identification of differences in investment responses across sectors exposed to a common monetary shock. Identification relies on the interaction between the monetary shock and a structural measure of financial dependence, following a heterogeneity framework similar to difference-in-differences approaches. Preliminary results suggest that sectors with higher external financing dependence exhibit greater sensitivity to monetary shocks, consistent with the credit channel literature. The paper contributes to a better understanding of monetary policy transmission mechanisms in heterogeneous contexts and provides an empirical basis for future extensions incorporating dynamic effects and different monetary regimes.
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