The Regional Effects of Monetary Policy in Europe. Universiteit Nyenrode Working Paper, Universiteit Nyenrode

This paper provides an empirical analysis of monetary transmission in 68 European regions. The evidence supports previous findings for the US on the importance of the industry mix channel of monetary transmission.. In Europe, there is a significant relationship between the regional impact of monetary policy and the proportion of the labour force working in industry. In addition, country-specific dummy variables are used to proxy for the more institutionally-determined differences in monetary transmission. These are significant for the regions in Spain and in a few smaller EU countries. Finally, an analysis of variance for the German, French, Italian and British regions shows that the between-countries variation in the regional impact of monetary policy is not significantly larger than the within-countries variation. I conclude that, at present, regional differences in the impact of monetary policy are unlikely to seriously hamper ECB policy