The cross-industry effects of monetary policy: New evidence from Bangladesh

This paper investigates the effects of monetary policy on the industry-level manufacturing output in Bangladesh, a developing country experiencing rapid economic growth over the last three decades. The analysis contributes to the literature by focusing on policy transmission employing detailed industry-level data from a developing economy. The fully flexible and theoretically consistent structural vector autoregression approach is used to disentangle the monetary policy transmission. Our investigation reveals heterogeneous sectoral responses which are systematically related to the size, age, ownership, types of goods produced, and financing requirements of firms operating in a particular sector. The results remain robust with a host of alternative modelling specifications. The findings would shed light on monetary policy transmissions in similar other developing economies. •Effects of monetary policy on industry-level output in Bangladesh are examined.•There are differences in cross-industry responses to monetary policy shocks.•The largest and export-centric apparel industry output rises significantly.•Beverage, pharmaceutical, machinery, and food industries also respond positively.•Industries least affected include mainly those reliant on informal financing.